Posts tagged BP
7/27/10 Midafternoon Report: Consumers still confident the economy sucks
Jul 27th
The market bounced around today as it tried to find a direction like scientists are trying to find the elusive “God particle” (though apparently scientists have figured out where it isn’t which includes Jane Austen’s writing, Bernie Madoff’s bank account, and Jamaica. But newsflash Einsteins, you might want to check Brooklyn Decker‘s vagina because if the “god particle” isn’t there, Nietzsche may have been right.).
Anyway, the big macro news was that consumer confidence fell to a five month low with consumers still worried about jobs, the potential death of fiat currency and subsequent return to the barter system, and Eliza Dushku‘s consistent refusal to do nude scenes. The index fell to 50.4 from an upwardly revised 54.3 and economists had guessed it would come in at 51, so good on them for almost correctly predicting one number out of the thousand they guess on yearly. That said, a drop in consumer confidence could lead to further declines in spending which is as good for the economic recovery as fat tails are for trying to forecast using gaussian assumptions, tickets to the Ford theatre were for Abraham Lincoln, or The World’s Biggest Gang Bang was to Annabel Chong‘s pelvis.
In headline manipulatedly (and yes that is more of a rehetorical tautology than “free gift,” “short summary,” or “Kathy Griffin manly”) positive macro news, the Case-Shiller home price index was up 1.3% on a non-seasonally adjusted basis, .5% on a seasonally adjusted basis, 4.7% year over year, and 30% in the land of make believe where every party is as delightful as a rainbow. Of course the numbers are more worthless than a hand job from a quadriplegic with carpal tunnel disease as the Case Shiller index uses a fucking three month average so inflated home sales from April due to the now expired the government tax credit are still in the numbers. What we do know is that home prices are at least 29% below their inflated peak from four years ago, foreclosured properties are at record highs, and Sofia Vergara is hot.
The market remains at a headscratchingly confusing time (though if it were Money McBags’ head and Diora Baird doing the scratching, that would be a lot less confusing) with macro data continuing to be marginally bad at best and yet earnings coming in moderately good at worst. So which is the leading indicator and which is the lagging? It is a question that is proving to be a bigger conundrum than anything the Sphinx, Hamlet, or Andy Rooney ever asked (go to ~1:13 in the video).
In Europe, all but one of the 27 members of the EU agreed in principle to new BASEL regulations, with only Germany holding out as they wait for a bigger signing bonus, guaranteed playing time, and use of the EU locker room to entertain groupies during breaks in the negotiations. The new proposal is less onerous than earlier proposals and give banks more leeway to define what counts as Tier 1 capital potentially including stakes in other banks, future tax benefits, and monopoly money. Regulators are still debating the amount that banks will ultimately need to hold as reserves but Money McBags is pretty sure that whatever the number winds up being, it won’t be enough for the next bubble.
Also internationally, Germany’s consumer confidence from the GfK institute rose to 3.9 but as Money McBags doesn’t use the metric system, he has no idea what that means. That said, with Germany being Europe’s largest and least funny economy, rising confidence can’t be a bad thing.
In the market, DuPont (ticker DD) announced a good Q which was the second time today the market got excited about a set of double Ds with JWOWW having rung the opening bell. DD earned $1.17 per share, beating analyst guesses of $.94 eps as a result of 26% revenue growth driven by a 33% increase in emerging market sales. They also raised 2010 earnings guidance to $2.90 to $3.05 per share from $2.50 to $2.70 and told analysts to suck it.
Deutsche bank made analysts look like deutsche bags by putting up a big Q as well. DB posted a 9% rise in earnings despite weak performance from their investment banking business which had to take a quarter off from manipulating the market while new regulations were being discussed. That said, it was a good Q for the German bank who is still likely drunk and throwing out the saran wrap from their traditional German scat party as a way to celebrate having passed the europe bank stress tests last week (though the tests were about as vigorous as a Kirstie Alley workout video).
Finally, BP was down after posting a $17B second quarter loss thanks to creating the worse unnatural disaster since the Lohans failed to get an abortion 24 year ago. And Apple will now be forced to allow third party software on the iPhones which means porn lovers everywhere just lost another 30 minutes of their day. The real purpose of the ruling by the copyright office is to allow iPhone users the ability to unlock their phones without any repercussions and thus have the ablilty to change their wireless service provider from AT&T to something that works a little bit better, like smoke signals, shouting, or semaphore.
In small cap news, CTGX reports tonight and Money McBags expects an inline quarter at best with EMR still a few Qs away. TSYS was up 4% plus and remember on 7/9 Money McBags said it was too cheap and would make a nice short term trade and it’s up just under 20% since then so good for you if you picked up some shares but don’t get too greedy as news on the company remains thinner than OJ’s alibi and it has traded down for a year for a reason.
Last week EPAX, a small, overlooked, and horribly performing name which Money McBags thinks is an interesting company put up a Q as crappy as expected. Money McBags broke down this company in quite a bit of detail a few months ago but they basically arrange for international student travel so little Jimmy can lose his virginity to an Amsterdamian hooker all under the guise of educational experiences. The point is, the business sucks right now as if it were Jesse Jane on the set of Island Fever 4. The company sells expensive, completely discretionary trips to Europe in the biggest recession in 70 years when in the internet age all one has to do to spend a night in Paris is steal their neighbor’s wifi signal. This last Q, gross margin was down ~15% and with operating costs flat at $12MM, eps was down ~20% to $.79 per share in what is traditionally the strongest Q for the company as it is right before the summer travel season.
Money McBags’ estimate remains at $.49 eps for this year and the company released guidance for $.48 eps to $.52 eps (and yes, Money McBags’ $.49 eps estimate was from way back in April when the street was still at ~$.60, look it up, so his 15 minute earnings model proved to be more precise than sell side analyst models which is less surprising than finding out that Gary Colemn didn’t live to age 50). The point is, the company is still struggling with enrollments down 17% and their recently launched Discover Adventure travel progam having underwhelmed like a bachelor party in which Mayim Bialik jumps out of the cake (or more precisely, eats her way out).
So why the fuck would Money McBags be interested in a company whose EPS is going to decline by 50% and is trading at >20x current year guidance? Simple, volume. Well, actually volume has little to do with it but cash does. The company has $53MM in deployable cash and a market value of $210MM so ~25% of their value is in cash or roughly $2.50 per share. Not only that but this company can scale quickly as they are already running a lean operation and until this year were able to maintain $1 in earnings power.
So the upside is that people become a little less freaked out about the economy in a year, EPAX buys back shares with some of their cash, and Hanna Hilton comes out of retirement and offers her fans free ice cream sundaes for continuing to have supported her in her down time (and yes that has very little to do with EPAX, but whatever).
This company is an interesting way to play a recovering economy and while Money McBags doesn’t think that is going to happen anytime soon, it is a cheap way to hedge one’s negative bets. Money McBags doubts the stock does anything for at least another 3Qs and he doesn’t own it nor is he going to buy it, but it pays ~2% yield and is one way to play a market recovery with some downside protection.
And remember, When Genius Prevailed is on Facebook and Twitter.
7/26/10 Midevening Report: Market rally excites quants as S&P rubs up against upper bollinger band
Jul 26th
The market ran again today as Fed Ex boosted guidance due to international companies wanting shit faster and macro data headlines were manipulatedly good (like Cameron Diaz‘ face on a magazine cover). The big macro news was that new home sales jumped 24% which is the biggest jump since May of 1980 and totally sounds better than saying new home sales were the second lowest since 1963 (and you remember 1963, the year the Beatles released their first album, JFK was assassinated, Raquel Welch was breaking in to Hollywood, and full muff was the norm). Of course 1963 is also when this data started being recorded, so for all we know it could also be the second lowest month since 1863, but whatever. So before we start handing out lobster tails and buy one get one free blumpkin passes to Amber Lancaster‘s powder room (and Money McBags will take two of those please), perhaps we shoud look at the shittiness (which may be too technical of a term for most) of the absolute number and ignore the relative spin.
To start with, last month’s new home sales were revised down from 300k to 267k which is only a minor 11 fucking percent downward revision (and minor in the way that reading a Thomas Pynchon book gives someone a minor headache or bumping in to Audrina Patridge would give someone a minor stiffy). Anyway, last month’s number of 300k, which is now 267k, means that new home sales fell by 37%, 40%, or 47% last month depending on which of the manipulated numbers from two months ago you want to use as the base line (the 504k initially reported, the 446k downwardly revised number from last month, or the even more downwardly reviesed 422k reported this month, and yes, two fucking months after the data, the numbers are still being downwardly revised because apparently they have yet to hit zero).
The point is, the awfulness of last month’s number keeps getting worse but investors are overlooking that because the headline growth for this month is 24% and 24% growth is a big fucking number (even though in absolute terms it is still the second worst number ever and will more than likely be revised down next month to 305k). So while economists and the Commerce Department can point to growth rates as a sign of accomplishment, it’s as disingenuous as landing on an aircraft carrier and claiming Mission Accomplished in Iraq or telling Rosie O’Donnell she doesn’t look fat in those jeans. In short, last month’s historically bad number gets revised down more and thus this month’s second worst historically bad number gets to look slightly better because of the BS growth rate off of the downward revision. Just imagine how great this month’s number would have looked if it went from one new home sold to two.
Anyway, the 330k number being reported is in fact ~24% higher then the 267k number (but only 10% higher than the 300k number that was actually reported last month) and it beat analyst guesses by 10k and since analysts have proven to be so right over the last 5 years to 3,000 years, a beat is such good fucking news that the commerce department can spend the day admiring the new portrait of Carlos Gutierez instead of trying to fix shit. But lets not let details get in the way of a good rally because that would be like letting a little hepatitis get in the way of boning Pam Anderson.
There wasn’t much international news today except that Europe is starting an anti-trust case against IBM, though if Money McBags were IBM, he wouldn’t trust the europeans in their black jeans and with their love of european fudge pops. The EU is claiming that IBM may have abused their dominant position in the mainframe computer market like the dominant Ariel X abuses her defeated foes in the NSFW Ultimate Surrender Summer Vengeance tournament. This anti-trust case stems out of complaints from a company called T3 communications which is a firm invested in by MSFT and other than Tiger Woods’ ex-wife, MSFT is the foremost authority on anti-trust.
The big stock news of the day is that Fed Ex raised their guidance for fiscal 2011 from $4.40 to $5.00 per share to $4.60 to $5.20 per share and this comes after UPS showed everyone what Brown can do for them by squeezing out a solid quarter last week. UPS’ revised guidance was driven by increased demand for international priority packages where according to a Wellls Fargo analyst: “Growth in Asia has been red hot, fueled by the tech sector and iPhones and handheld devices and discounts on Hello Kitty’s line of dildos.” Fed Ex is feeling good enough about their operational efficiences and global volume growth that they have reinstituted their 401k matching program so now employees can lose the company’s money in addition to their own.
In other stock news, BP is getting a new CEO and hopefully this one won’t won’t be a dud even with a name like Robert Dudley (and that was such a bad pun that Jay Leno should feel free to steal it). Dudley will be the first Amercian born CEO of BP as the company’s board hopes to improve on the langauge barrier between themselves and the US government (as apparently “your shit is not safe” didn’t translate correctly from US regulators to BPs former CEO). Otherwise, it was a light earnings day on the market but Roper industries put up a nice Q despite a rumored take over from Furley Industriies which turned out just to be a wrongly overheard conversation in the company kitchen.
In small cap stocks, IMAX had a strong day on Inception’s continued box office outperformance and the stock has bounced back nicely since Money McBags talked about it as something to avoid the other week. Money McBags favorites CRUS and KITD also had solid days, as did just about everything else in the small cap space, except for IBKR which deserves to go down for how they made Money McBags feel after their earnings announcement last week which he was more highly anticipating than the inevitable Christina Hendricks playboy spread (and yes, it will happen). Money McBags is short on time today so he won’t be getting to any detailed small stock analysis but it should be a busy week with QCOR, IMAX, CTGX, and NTRI reporting so he promises he will have more compny breakdowns for you as necessary. If you are craving for more dick jokes though, Money McBags was busy in the comments section from Friday’s column, so enjoy.
7/12/10 Midevening Report: Hefner bid titilates Playboy stock, shares bust out
Jul 12th
There was little news in the market today as investors waited for AA’s earnings tonight as a signal of things to come as everyone knows aluminum production is what really drives the economy (and yes that was sarcasm). Without much macro news other than shit continuing to get worse with temporary census jobs ending, republicans filibustering extended unemployment benefits to further punish the people who likely had little to do with the recession (other than likely borrowing way beyond their means), and no new actresses coming out as bisexual this week, we were left with a flurry of M&A driving the market (as opposed to a flurry of T&A, which likely would have led to a strong rise).
The biggest M&A deal occured between two companies about whom no one gives a fuck, as AON is purchasing Hewitt for $4.9B in cash, stock, and old actuarial tables signed by Elizur Wright. While AON will be in flux for a bit, they should be able to immediately make use of Hewitt’s human resource and outsourcing capabilities to fire the appropriate amount of people while making sure that everyone gets a smiley face cupcake. Once done, they can further get value out of Hewitt’s consulting business by leveraging them for a business case to try figure out why the hell anyone would have paid a 41% premium of 7.5x forward EBITDA for Hewitt. Of course using their now fully owned Hewitt for that study would either be considered a virtuous circle, a vicious circle, or the least fun daisy chain since full bush was still in style.
In other M&A news, Hugh Hefner wants to take Playboy private (after years of taking it to his privates) at a 40% premium to current price, or about what he pays to the Shannon sisters. Playboy magazine sales were down 48% in Q1 as the business continues to struggle with the invention of a little something called the internet where people can now read the hard hitting and biting journalism Playboy offers for free. The company has gone through a major facelift over the past year by laying off staff, streamlining functions, and putting out bigger and more well-rounded (and very NSFW) articles. The fact is, Playboy still has a recognizable and aspirational (as well as ass-pirational) brand and now that Hefner is opening up his robe for the company, there appear to be multiple bidders including PE firms, top competitor Friend Finder, and the creepy guy in the airport gift shop. The company is definitely at a tipping point with the internet producing more free porn per minute than David Duchovny can view, but in the right hands, and with a stroke of luck, the brand could come strongly back.
In other M&A news, BP may be selling assets in order to pay for a new Gulf. The company is said to be in negotiations with Apache to divest $18B worth of some of the largest Alaskan assets in the world. Finally, JNJ is buying MEND, a company that makes a device for treating brain aneurysms in stroke victims just in time to catch the growing popularity of the KFC Double Down.
Internationally, the European Commission came out with a reform package to boost consumer confiidence from “holy fuck we’re screwed” to “at least we’re not Kazakhstan.” The package includes EU-wide measures to protect bank account holders by guaranteeing savings accounts up to 100k euro and investment accounts up to 50k euro while promising to pay account holders within seven days of the almost certain to come bank failures. Lastly, China anounced exports grew by 44% as more people sink to poverty and can only afford the cheap shit made in China.
In large cap stocks, MSFT is up on news that they are going to make it rain in the cloud computing space by teaming up with Fujitsu to invest money in the growing cloud technology sector while GOOG continues to rise after having their license renewed in China. Money McBags was told that to get their license renewed, GOOG just had to follow the chinese road rules of stopping at yellow lights, driving 20 miles under the speed limit, and using their turn signal sparingly.
In small cap stocks, NLS is up 16% on no news that Money McBags could find other than people hate making money. If you remember back in December, longtime reader Matty McSacks hypothesized that NLS was worth ~$4 per share and it was trading at $1.85 at the time. Money McBags looked in to the matter and thought those estimates seemed high since the company sells expensive discretionary items during a little bit of a recession and after a hella confusing quarterly release and a jump up, NLS has settled back to where it was at the beginning of the year with today’s run up. In their last Q, NLS trimmed their losses to only a loss of $.08 per share but their biggest segment, retail, shed 30% of their revenues as if revenue had spent the entire Q working out on a Mobia. The drop in direct business was driven by a 37% drop in credit approvals from their finance partner and while Money McBags is no Fair Isaacs, it doesn’t take Isaac Hayes to see that credit isn’t going to get better anytime soon. With the direct business lagging, gross margin dropped to 50% from 56% but thanks to restructuring, the company did away with $10MM of operating expenses which allowed them to lose only $2MM and have near breakeven EBITDA. The company hasn’t made money since 2006 and with the economy sputtering again, it’s not clear who the fuck is going to be out looking for a new Universal machine to build muscle since they won’t be able to afford to buy supplements to help maintain that muscle. The only arguments that can be made for this company are that it is trading at ~.35 of sales, they didn’t burn cash last Q, and they have ~$12MM of unrestricted cash which is ~20% of their market cap. That said, rat tails, hammer pants, and Bea Arthur will come back before this company does as gyms aren’t upgrading their equipment, people continue to get lazier and fatter, and those who used to be able to afford expensive clothes holders for their bedroom (which NLS machines invariably windup being), remember they have something less expensive called a closet and a floor. So even though the stock is up big today signalling something is happening (like potentially a big short investor getting a capital call), Money McBags would not be a buyer because the consumer remains weaker than a virgin tequila shot.
And before we go, on Friday Money McBags told you about TSYS and the opportunity it presented for a short term trade. The company was up 3.5% today (though on light volume) with IWO down ~120bps so something seems to be going on there. The company is hella cheap and while their earnings releases and segment financials are more complicated to decipher than a Rube Goldberg contraption or what the fuck your lady friend is actually saying to you, they are in growing markets and seem to be winning business. Money McBags doesn’t have a great longterm feel for the company since he doesn’t quite get the step function revenue stream of their text messaging business and why they never seem to make that next step up, but if they can really hit their guidance of $80MM-$85MM of EBITDA this year, this stock should see solid appreciation now that it has seemingly bottomed.
7/6/10 Midafternoon Report: Heat wave melts market rally, or maybe it was common sense
Jul 6th
Holy crap is it hot out today. It’s so hot that the only difference between the East Coast and hell is that Jim Cramer isn’t in hell, yet. Anyway, the market was rebounding a bit after downing several vials of muscle relaxant to help cure the severe case of lockjaw it developed from going down so much and so frequently over the past few weeks, but that all changed in the afternoon when reality sunk back in to investors’ portfolios. While this was likely a minor temporary relief rally, like Mel Gibson’s career after his first anti-semitic tirade but before his second tirade where he told his wife that that he was going to burn the house down among other colorful and completely insane ramblings, you should all trade in to it carefully. And yes, things have now gotten so bad that Money McBags is forced to use Mel Gibson’s racist rants as analogies for the market, so we’ve got that going for us, but at least we’ll always have the dot-com boom.
The main problem today is that macro news is lighter than Suze Orman’s resume and that is why the market tried to rally a bit. The ISM released their non-manufacturing index which measures 90% of the legal economic activity in the US and to the surprise of no one (other than analysts, economists, and CNBC), it fell to 53.8 which was a 4 month low and below the 55 guess of analysts. Out of the 11 metrics the ISM measures, 10 slowed down and one stayed the same (something called Supplier Deliveries, and in this economy all deliveries are being supplied in the rear).
Internationally, Australia kept interest rates at 4.5% claiming “uncertainty about the pace of future global growth.” Though if you read the fine print, they say the uncertainty is whether it will be 0%, negative, or global economy crushing. Finally, the market waits for Thursday’s ECB policy meeting where Jean-Claude Trichet will try to the soothe the market’s fear of european banks failing by assuring them that stress tests will be run and then offering the market a nice sitz bath. While it’s nice that the ECB is contemplating stress tests (which will no doubt show that european banks need to add more fish oil to their diets, start running for 30 minutes a day, and clean up their fucking balance sheets to try to get healthy), there is absolutely no way that european banks don’t get a clean bill of health and there is absolutley no way the ECB’s assessment will be correct. 151 banks just rushed to get funding from the ECB which is the most in a year and if that is a signal of health, than my name isn’t Money McBags.
In large cap stocks, a report from the Semiconductor Industry Association showed chip sales were up 47% last month thanks to demand from China, India, and the Lawson family. This has helped lift chip stocks and regardless of the economy, Money McBags is a believer that the pace of technological advancement will continue to accelerate and thus having some semi exposure in your portfolio should be a longterm benefit like windpower should be a benefit to the environment, saving should be a benefit to the economy, and a tracheotomy to Lady Gaga should be a benefit to ending noise pollution. Also, BP was up today after an upgrade by RBS from “Hold” to “Buy.” In addition to that upgrade, RBS announced they will be dropping the “R” from their name to hereby just go as “BS” and are retroactively initiating coverage on Enron with an “Accumulate” and Kate Beckinsale with a “Sell.”
In small cap news, it is ugly out there. Money McBags favorites KITD and KIRK continue to get pounded even though they are so cheap that if they were materials, not even China would use them. KITD is a bit funky because so much of their revenue is Euro driven so Money McBags has no feel for their upcoming revenue because a lot will depend on the average fx rate they use in conversion as well as the actual revenue split. So he expects them to miss analyst revenue estimates in the short term but long term, this company is growing 50%+ ex. currency effects, it is in a fast growing market, and they are among the biggest players with cash to spend to continue the roll up. This is the time to be building a position here even though the market is totally full of shit. You wait for chances like this to buy good companies cheaply, same with KIRK, so keep KITD and KIRK front of mind.
One interesting name which continues to fall and is becoming more appealing is IMAX. Money McBags broke them down a few months ago but basically they have been able to grow rapidly due to a JV theater strategy that has allowed them to open more theatres and take less risk. The did $42MM of adjusted EBITDA in Q1 but that was driven by a little something called Avatar which has now passed through the theater system like a kidney stone through a urethra only with less pain and with more aliens.
In the quarter prior to last, the company did ~$20MM in EBITDA (so $80MM annual run rate) and estimates are for $100M both this year and next year with the Avatar business leaving but new theaters picking up that lost growth. The current EV is ~$800MM so the company is trading as 8x to 10x EV/EBITDA which isn’t terribly cheap on the high end, but at the low end, it is getting to be attractive (not quite Alice Eve attractive, but probably Amber Lancaster attractive, and Money Mcbags is ok with that). The problems are that there has been a lot of retail money in this name which needs to get out, there is fear of pricing pressure killing their high ticket premiums, it is unknown how many JVs they opened this Q, and the business still relies on content and content is fickle (as noted by the brilliant WGP which every now and then misses the mark, like perhaps today, but in Money McBags’ defense it is very very hot).
The most recent Shrek movie underperformed because at some point even little kids can only take so much of Mike Myers so that, on the heels of Avatar going CGbye, is setting up IMAX for a top line miss. Today, the stock was down 10%+ on no news other than pretty decent numbers for the latest Twilight movie which is sure to slowly, unoriginally, and vapidly kill pre-teen brain cells everywhere. IMAX brought in $9MM from that likely abortionally bad movie in the opening week which is certainly at least as good as they could have expected.
Look, Money McBags could talk about EBITDA, revenue growth, and Ashley Greene in 3D, until he turns bluer in the face than a depressed smurf but the issue with IMAX stock is not the fundamentals, it’s the investor base. The stock was a high flyer, a momentum trendy name that drew in a lot of retail investors who institutional investors and hedge funds were able to continue to milk until deciding to blow out. Basically, once Avatar left and the story went from “we have the hottest fucking movie in history in a unique format” to “come watch an animated donkey in 3D,” growth investors ran. They bought the rumor and sold the news as if the news had slept with Magic Johnson. So now IMAX is in that weird stage where momentum investors have left and it is not yet cheap enough for value investors to buy. That thesis makes less fundamental sense than string theory, but it is what it is. So with institutions having puked this out, retail sellers are now taking their losses and when they wash out, value investors may start to kick the tires, check the oil, and make sure all of the company’s johnson rods are in order.
So look, Money McBags thinks this company is certainly on pace to do $80MM-$100MM of EBITDA this year and will likely at least hit those same numbers next year as JVs grow and people take even fewer vacations and thus spend more money on cheap family entertainment. So if you are a longterm owner, you don’t need to ditch anything here. That said, this should trade down with the market as people take gains and value investors probably won’t get interested until ~6x EV/EBITDA and if they earn $80MM-$100MM of EBITDA, that is still 25%-40% down to go, so you can probably still find a better entry point. Now it is possible for the company to earn much more than $100MM of EBITDA next year, but one has to make a few leaps of faith on JV openings, content, and the economy not going to $0, to get there, which is why Money McBags prefers to use the safer $80MM-$100MM run rate. The company basically needs to show they can perform without Avatar and while Money McBags thinks it is likely they will continue to drive traffic, he would hold off buying for another 20% down (and if it rockets up and you miss it, you need to be ok with that) because no matter how much you try there are four things you shouldn’t do in life: Spit in to the wind, start a land war in Asia, forget to look for the Adam’s apple, and fight the market. So keep IMAX on your watch list and get ready to pounce when it washes out.
And don’t forget, When Genius Prevailed recently joined Facebook to make it easier to spread the gospel.
6/22/10 Midafternoon Report: Home Un-Improvement
Jun 22nd
The market had trouble finding a direction for most of the day as news is thin and the summer is beginning so most volume is moving to the Hamptons where portfolio managers can sip on lemonade, listen to yacht rock, and denigrate the poor all while ignoring the economic data which has been so lackluster that it is in line for its own NBC prime time sitcom (tentatively titled: Just Dilute Me!). There was one bit of macro data released today which was about as encouraging as the letter “L” is to Jackie Chan on a read through script and helped send the market tumbling end of day. Purchases of existing homes fell last month and somehow analysts are surprised about that since reading comprehension is not one of their strong suits and thus they missed the part about the government tax credit running out and sales being pulled forward like Eddy Curry’s pay check. Home sales dropped 2.2% from last month despite near record low mortgage rates and falling prices and are now starting to roll over and play dead like a trained circus dog or Brittany Murphy. The best part is that the National Association of Realtors is blaming part of the drop on a processing delay which is holding up 180k mortgages as apparently the red “Rejected” stamp has run out of ink. Analysts guessed sales would be up 5.5% to 6.12MM homes which was such a close guess that it only missed by a nut hair, that is if the nut hair belonged to a brontosaurus, and not any brontosaurus, but a brontosauros with elephantitis of the nuts. But hey, maybe the 180k “processing” hold up was real (though something smells fishier about it than Paris Hilton‘s penis flytrap after pissing out a Long John Silver’s fish taco platter with extra tartar sauce because Money McBags doesn’t remember hearing about any processing holdups when 7MM+ mortgages, or 25%+ more than last month, were being processed monthly in 2005, but whatever). Anyway, if we assume the hold up was real and add the 180k home sales that were delayed due to “processing” to the monthly figures, exisiting home sales would have been up .8% which is still way fucking short of the 5.5% increase analysts guessed. And making it even worse is that analysts used a lower number to build their forecasts as last month’s sales were just readjusted upwards to the 579k number so analysts were actually forecasting greater than 6% growth. Money McBags hasn’t seen a miss this bad since Men Who Stare at Goats (and really, that movie was so fucking awful Money McBags wanted to stare in to the fucking sun so his retinas would burn and thus he wouldn’t have to watch the whole movie) or any economics paper released by Art Laffer. With the expiration of the government tax credit, the real question is if home sales are merely taking a breather after an artifically pulled forward sales surge or if the housing market is about to take another dip and send the economy back to it’s bad place.
In international news, Britain released a new emergency budget which includes an additional 17B Euro of budget cuts (25B Euro in total, or about what Money McBags would pay Britain for a chance to have Lucy Pinder and Nikkala Stott star in his personal home movie “The Mystery of Bonehenge”). The cuts are aimed at stricter rules for what qualifies someone to get disability pay (simply listening to Madonna’s music will no longer be considered a disability, though listening to it and liking it will remain a sign of real impairment as only the auditorily challenged can bear that shit), a freezing of welfare benefits, an increase in the value added tax from 17.5% to 20%, a new tax on banks, and the biggest revenue generator will be a fine levied on those with crooked teeth. In other international news, the yuan fell back a bit after yesterday’s rise as the Chinese government is determined not to let it appreciate too quickly for fear of losing a large part of their manipulated competitive advantage. Chinese state owned banks are now buying up dollars to either prevent a rapid yuan appreciation or to have more worthless paper to burn to keep warm when fiat currencies fail and the world reinstitutes the barter system.
In stock news, Walgreens announced a crappier than expected quarter and is trading down as if it spilled 1B tons of oil in to the Gulf. The stock was down 7% after revenues rose 6% and earnings came in at ~$.53 taking out one-time charges which was $.04 below analyst estimates. Speaking of Gulf oil spills, BP was down another ~3% today because it still has not hit zero (and yes, Money McBags is going to use that same joke every day until BP is actually at zero which will be sometime between tomorrow and when investors get their heads out of their asses). And finally, AAPL is up today because in direct opposition to BP, it hasn’t reached infinity yet. AAPL’s price target was raised by Deutsche Bank to $375 based on their new iPhone 4 release, the continued strong sales of the iPad, and a need to publish research to get portfolio managers to trade with Deutsche Bank.
In small cap news, WGO sold off hard on no news that Money McBags could find other than perhaps people realizing that paying more than 30x for a company in a declining industry with an expensive discretionary consumer product and a fleet of cheaper alternatives, is probably not the best thing to own. Shit, Money McBags would rather own NTZ which might be the worst idea for a business right now (high end furniture in Europe), worse than even selling ice to eskimos, unfunny jokes to Jay Leno, or panties to Britney Spears. The difference between NTZ and WGO of course is that NTZ is trading like it is a stupid fucking business while WGO is trading like it is selling super powered iPhones which give off pheremones to attract Aubrey O’Day rather than $100k gas guzzling unnecessary RVs. After last Q, Money McBags hesitantly raised his WGO top end target to $9 from $7.50, so there is still plenty of room for the stock to go down. In other small cap news NTRI has continued to try to make a run. Money McBags wrote about them after thier last Q and they remain a very interesting watch list name as the company has a ton of earnings power, trades like a momentum name, and just put up a quarter of positive new customer growth which fuels their sales. It’s still a bit early for this company as they keep fucking up their ad spend and their affiliate program sucked a donkey dick (which was certainly pleasurable for Eeyore, yet did nothing for investors) to the tune of a $3MM charge last Q, so management clearly needs to figure out how to better execute (perhaps they should ask the state of Utah for ideas) but it’s trading inline-ish with peers, has a nice dividend, and if they can put up a good next Q should have significant upside. The only problem is Money McBags doesn’t have a lot of faith that next Q will be good and he doesn’t gamble (unless he is in Las Vegas, Atlantic City, his apartment, the car, etc..), so he is not going to buy. Money McBags prefers more certainty than he has for NTRI right now so while it has a number of things going right, Money McBags would still just be guessing at their next Q. One data point is good, two are better, three is a trend, and four is time to think about selling. We’re at the first data point now, so do your due dilligence.
6/18/10 Midday Report: Gold hits new highs, silver plans an intervention
Jun 18th
It’s quadruple witching Friday today in the market which is unfortunately just the day where stock index futures, stock index options, stock options, and single stock futures all expire and not the day where the market finally gets a 5-some with Elizabeth Montgomery, Barbara Eden, Melissa Joan Hart, and Omarrosa. While this is usually a volatile day, the market has been quieter than the Clinton’s bedroom as there has been little macro or company news released today. That said, owners of gold are being showered with rewards as gold has reached a record high today thanks to investors betting against the current fiat system remaining viable. While it’s likely we’ll hit a deflationary period before inflation takes off like Shawn Kemp from a delivery room, holding gold as part of your portfolio right now as a hedge against volatility and the potential crash of the Euro makes more sense than pairing Suaterenes with a nice foie gras. In other US news, Tim Geithner is apparently getting new and more power which he has easily earned given how he has revived this economy from dead to about to die again and helped to bail out the firms who caused this mess. Geithner is set to lead a new council run by the Treasury Department to identify companies that might be shut down because they pose a risk to the financial system. So does that mean the government is going to shut down the SEC, FCIC, FINRA, FDIC, and NAMBLA? Don’t they all do the same fucking thing? Hey, I know how to solve a problem, let’s just create other fucking groups to do the same thing that current groups do but hope they do it better. Unbelievable. Money McBags just wants to know when more bureaucracy has ever fixed anything other than creating meaningless jobs. Somewhere Josef K. is scratching his head.
Internationally, the Eurozone added Estonia as the lastest member in their global ponzi scheme. Estonia now has to pay $1B to Greece, and then Greece will pay 80% of that up to Spain, who will then pay 80% of that up to Germany. Funding problems solved. While it is certainly odd timing for a country to be joining the eurozone, Estonia said they had no choice after the University of Texas decided to stay in the Big 12 and and Utah beat them out for the last spot in the Pac 10. “It’s a great day for Estonia,” remarked Estonian prime minister Andrus Ansip, who was perhaps (an)sipping on a little too much Saku Originaal as getting in to the Eurozone right now is about as desirable as joining a tv show co-starring Ted McGinley or being drafted by the Washington Generals. Anyway, for those of you unfamiliar with Estonia, here are some quick facts: They were 4th out of 173 countries in the Worldwide Press Freedom Index narrowly being edged out by Canada and their NSFW Naked News, they’ve previously been occupied by more countries than Zsa Zsa Gabor’s vagina, and the person they most admire is Yosemite Sam. They’ve been independent since 1991 and are finally looking to settle down after 20 years of hard drinking and nordic flirtations in order to raise their favorite offspring Tiiu Kuik in a stronger family environment. So welcome to the Euro Estonia, just don’t burn all those Kroons quite yet. In other international news, the IMF backed Spain’s austerity measures after downing one sangria too many and learning about imaginary numbers.
In stock news, C is planning on raising $3B because they haven’t lost enough investor capital already. Just remember, this bank is so poorly run and has such bad judgment that they fired someone for being too hot, and she’s not even really that hot, I mean we’re not talking about Sara Carbonero for fucksake. And the best part about this is that they are raising money for their private equity and hedge fund groups right before Paul Volcker slaps his rule on the table and bans banks from owning those type of funds. Wow. Good for the funds but that makes about as much sense for C as it did for Saddam Hussein to build a new palace in Baghdad in March of 2003 or Simona Halep to go bra shopping right before the summer of 2009. Money McBags is sure C’s CEO Vikram Pandit will retain some type of personal interest in these funds when the Volcker Rule takes effect so I guess it makes sense for him but for C shareholders it seems like a whole lot of wasted time and energy (though if you’re a C shareholder, you have bigger problems to worry about than the company raising money for funds they are going to have to give up soon). In other news, CVS and WAG decided to end their snit over prescription drug benefit reimbursement and just go back to screwing Medicare and the American health care system together. Finally Moody’s lowered their ratings of BP by 3 notches from the unintelligible Aa2 to the just as unintelligible A2 (or maybe it was the other way around, who the fuck knows). It’s nice to see that weeks in to one of the biggest environmental disasters in history, Moody’s is still on the ball. Good job guys, Money McBags eagerly awaits your downgrade of daguerreotype companies within the next 6 months. Though to be honest, any investor who needs Moody’s to tell them BP is more fucked than a cupcake in Kirstie Alley’s house probably shouldn’t be investing.
In small cap news CRUS continues to rocket up. Money McBags believes $24 (20x his $1.20 estimates) is a plenty fair price but at $20 he’d start to think about trimming to take some of the hella sweet profits you’ve made off the table (and rememeber Money McBags first brought CRUS to your attention when they were trading under $8 and he told you he bought them shortly thereafter. The fact that he dumped them after the “Flash crash” for liquidity reasons doesn’t change his valuation, it only makes him angrier that he believes the market structure is so broken that fundamentals may not matter). And if any of you are interested in a high flying small volatile momentum name, check out SPRT. Money McBags will try to break them down next week but they are basically outsourced and remote computer repair. It’s like Geek Squad only you don’t have to have a fat smelly skeevy fuck show up at your house and stink the place up while he wipes all of the porn off your computer to clean up whatever virus you downloaded while searching for that Miley Cyrus upskirt pic (and Money McBags will not be linking to the pic since he believes in the legal system). It’s certainly an interesting and potential low cost business model and the company is currently scaling up their technicians faster than a young hollywood starlet scales up her ambitions. It is doubtful that in this market Money McBags would ever own this stock because a lot has to go right for it to be valued even near what it is trading today, but it has a nice story has some real opportunity, and more than anything it has strong momentum and a rapidly accelerating business. If you have money you don’t care about, send it to Money McBags for a night out at Rick’s, otherwise, do some research here as this might be a good trade.
6/16/10 Midday Report: BP sets aside $20B to be used on an oily day
Jun 16th
First of all, Money McBags would like to thank all of you for your feedback yesterday. His inbox is currently overflowing like Whitezilla’s urethra after downing three cases of Mountain Dew in ten minutes (and feel free to google “Whitezilla” on your own time, Money McBags refuses to link to it due to good taste) but he promises to try to get back to each and everyone of you. The feedback was helpful as Money McBags learned that he does both too much analysis and not enough, the posts are both too long and too short, and the jokes both add to the analysis and detract from it. The only thing that was universal was that his readers love the pics so Money McBags is thinking of dropping all subject matter, words, and rational thought and turning WGP into another NSFW photo site. Anyway, Money McBags is still just short of his goal of 1MM visitors so if you all could spread the word, he will be able to continue to provide you with what you like best.
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America’s global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don’t figure in to analysts’ regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn’t “dead wrong” or “not even fucking close”). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month’s 672k or down only 9k from the Commerce department’s newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: “readjusted”). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by “readjusting” last month’s number, the market got the bump from a better than expected number in April and now doesn’t feel as bad about the drop since it’s being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn’t “sinking his putts” in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers’ tax credit was going away didn’t make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don’t we start by knocking some shit off the 6%, I don’t know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we’ll move it a couple % from there. Is that so fucking hard? While it’s an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya’s gender, it makes a fuck load more sense than whatever analysts are doing. So here’s the deal. Money McBags isn’t going to open up his excel, he isn’t going to look at any data or any trends, and he’s going to spend fewer than 10 seconds on this guess but he’ll say next month’s new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it’s on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don’t have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he’ll dump the MDA and adopt them as the new enfants de Jerry. C’est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn’t add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain’s historic unemployment rate of 19%. Money McBags isn’t sayng the people of Spain don’t work, well, actually, that’s exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA’s acting director Edward J. DeMarco (and the J apparently stands for “just kidding”) said that the action “does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a “reflection of current or future performance?” Fuck, if that’s the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP’s credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they’ve basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one’s Punky Brewsters can do to one’s career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn’t want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga’s face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn’t heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO’s earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on “couples night.”
6/11/10 Midday Report: Retail sales drop as stores still insist on charging money
Jun 11th
The market has been relatively quiet today after yesterday’s meteoric rise on news less relevant than the Pound-Dong exchange rate (and oddly enough Pound Dong was also the name of Alexis Texas‘ last movie) or the 93rd decimal of Pi (which incidentally is 2). In US macro news, consumer sentiment was better than analysts guessed, largely because the survey was taken on payday and was done while Melinda Messenger lovingly massaged consumers’ fears away. The index came in at 75.5 which was up from 73.6 last month and above the median guess of 74.5 and was driven by consumers’ stated interest in buying durable goods such as cars and storage crates to put all of their shit in when the repo man comes to take over their homes. Interestingly enough, while consumer sentiment was up, US retail sales dropped proving once again that actions speak louder than words and all of the data is made up anyway. Spending fell 1.2% last month driven by auto sales being down 1.7% even though according to the consumer sentiment numbers, peple are looking to buy autombiles. These two data points couldn’t be more diametrically opposed than John Calvin and free will, Hemmingway and adjectives, or Richard Simmons and pants. Consumers intend to buy cars, but they’re not. Hmmm, maybe because 10% of them are unemployed and another 10% are underemployed or just not looking? Hey, Money McBags intends to buy a gold plated, diamond encrusted caviar dispenser that runs on the dreams of wide-eyed children, but he is just a few million euro short, but that is just a minor detail. So University of Michigan, put that in to your ridiculously misleading consumer sentiment survey and report it. One other interesting data point from the consumer spending numbers warrants mentioning and that is that sales in hardware stores were down 9.3% which likely means that people are spending less time fixing up their houses as they anticipate foreclosure.
In market news, Mary Schapiro is going after high frequency traders as tenaciously as a squirrel (or Ricky Martin) goes after a sack of nuts. High speed transactions now account for half of the market volume which is as healthy for the markets as Miley Cyrus‘ singing is to a hemophiliac (because her singing of course makes one’s ears bleed). Money McBags applauds Ms. Schapiro for not letting this relatively arcane corruption of the markets continue without regulation especially as high frequency trading was more negligent in the “flash crash” of the other week than the E! channel has been negligent in the devolution of american culture. Circuit breakers are now being put in to the market to halt shares of actively traded stocks when they move by +/- 10% in a 5 minute period which means BP stock should be halted on an hourly basis.
Internationally, things are relatively quiet today as the market awaits Greece’s impending default which is a worse kept secret than Burt Reynolds’ toupee or Lindsay Lohan’s implants. Greece has less ability to pay back their debtors than Athens did of defeating the Spartan-Persian alliance that ended the Peloponnesian war. Europe continues to hope that the IMF bail out can push Greek’s default out far enough so that Spain, Italy, and Amy Winehouse, can get themselves in order before the figurative shwarma hits the pita. In other international news, inflation in China rose to a 19 month high with consumer prices up 3.1%. Given the increasing pricing pressure and the rapid growth, China may start to allow their currency to fluctuate in a tight band, that is until the drummer of the band OD’s on heroin and the lead singer shacks up with the 2010 version of Bebe Buell.
In stock news, BP is pondering a dividend cut, something about needing the funds to help to clean up a mess resulting from spilling a fuckload of oil all over the Gulf and ruining an entire ecosystem. BP shares are now down nearly 50% after they tried to turn the Gulf into their own personal scat film.
Finally, Money McBags promised he would get to MLNK today. Why? Because apparently he likes writing about shitty stocks that underperform on a more consistent basis than the Alabama public school system. MLNK is a global supply chain management company that basically sets up shop next to electronics makers in Asia/Europe/The US. They manage the shipping process of the electronics makers’ products, the rebates and warranties, and then either don’t charge enough for their services or haven’t figured out how to do them efficiently, hence they lose money. They also recently bought a company called Tech for Less which sells used and refurbished computers which would seem like a good business to be in given the economy, but this business is only ~4% of revenues and based on how they run the rest of their business, is likely losing money. Anyway, this quarter MLNK’s revenue was down 7% to $213MM and below expectations because their new business is taking longer to set-up and their unit volumes are shrinking as inventories are no longer being added by retailers due to the fact that people seem to have stopped buying shit. New business revenue was $16MM compared to $44MM in fiscal Q3 last year which is so bad that Bernie Madoff wouldn’t even want to fake invest in this company. With revenue down, gross margin was down as well from 14% to 11% and EPS was a loss of $.08. However, taking out discontinued operations (though perhaps the whole operation should be discontinued), the loss was only $.03 per share. Non-GAAP income which is a proxy for EBITDA was $8.3MM, down from $16.1MM and defines the term “fuckawful.” That said, the company has no debt and $161MM of cash, cash equivalents, and broken promises. Free cash flow was $500k, just below last year’s fiscal Q FCF of $16MM, and yes, that was sarcasm. They did institute a new $10MM share buyback plan which Money McBags appreciates since he will likely be selling his shares so is glad there will be a buyer. And in the most bizarre ending to an earnings call ever, there were no questions. None. Zip. Zero. Nada. Investors were more silent than an electrolarynx user with a severe case of laryngitis.
So basically the only one who marginally gives a shit about this company is Money McBags since despite their consistently awful performance, MLNK is cheaper than a tattered Rusty Kuntz rookie card (and quick bit of trivia: “Rusty Kuntz” was actually the pre-production working title for the sitcom The Golden Girls). The company has a $288MM market cap and $161MM in cash so an enterprise value of $127MM. Their EBITDA had been as high as $18MM per Q, but this quarter shrunk again to $8MM. If we annualize the $8MM, they are trading at 4x EV/EBITDA and they previously said they expect business at the end of the year to be better. Of course last year they said they expected business at the beginning of this year to be better and it has fallen off faster than Yasmine Bleeth’s looks, so what they say needs to be taken with a grain of salt, or several grains of salt around a shot glass filled with tequila which is what the management team seems to be drinking before they give guidance. Money McBags has no idea how to evaluate this company any more as consumer spend is once again going in to the toilet and MLNK has shown less ability to execute than the state of Ohio. There is basically no good news for this stock on the horizon, they have significantly underperformed for several quarters in a row, and no one is interested in the company. So basically this is a value investor’s wet dream (well, that is if MLNK were going Lucky Pierre between Benjamin Graham and David Dodd, then it would be a value investor’s wet dream), or it’s a straight up value trap. Money Mcbags is likely going to dump his shares but it’s such a small position (and growing smaller by the day), that he may hold it for the improbable chance that they get better at their jobs.
6/10/10 Midevening Report: Market rallies in anticipation of tomorrow’s sell off
Jun 10th
Readers, Money McBags apologizes for his absence yesterday, unfortunately he has a life outside of the great When Genius Prevailed and that life required him to spend all day watching Anna Paquin scenes now that she is oh so comfortable with her bisexuality, so you can’t really fault him for that. Anyway, today the market seems to be running like a lobotomized senior citizen with an advanced case of alzheimers as it forgets Europe is about to collapse under a pile of oversized debt, the US unemployment rate is stagnating like the rebuilding of the Twin Towers, and the great Hannah Hilton remains retired. That said, short term macro news is pushing the markets to new heights, levels it hasn’t seen since at least last Friday, so ring those bells because the economy is all of a sudden back (until tomorrow).
Driving the market up today was that the ECB raised their growth forecasts, China showed an increasing trade surplus, and clothes-less emperors are now becoming the rage (because despite today’s numbers, the economy still has no pants). The ECB said GDP growth for 2010 will now be 1% which is above the .8% they had repviously predicted and above the potential 0% on which most investors are betting. While they raised 2010 GDP forecasts, they lowered 2011 from 1.5% to 1.2% which means the absolute level of GDP at the end of 2011 is now expected to be lower than it previously was (since multiplying last year’s GDP by 1% and then 1.2% yields a lower number than multiplying it by the previous forecast of .8% and then 1.5%), but why let math get in the way of a market rally? Honestly, if logic, common sense, and facts mattered then the markets would be efficient and Burton Malkiel would be so celebrated that he would be applauded by young and old on his daily random walks. In other big news, China’s trade surplus rose in May giving investors hope that China can keep fueling an expanding global economy. Imports and exports both grew by ~50% in May driven largely by an increase in purchases of lead paint to go with an increase in sales of toys. With a $19.5B trade surplus for the month, the Chinese government should get loved for a long time at the Beijing Rick’s Cabaret but is getting even more pressure to let the renminbi float like Kelly Madison‘s renminbis in the deep end of the pool in her San Fernando Valley abode. Finally, Japan revised their GDP upwards from 4.9% to 5% as they forgot to include the new buttress they put up around Tokyo to defend Godzilla’s impending attack.
While international news seemed to be strong, US macro news was mixed at best, which has left Money McBags scratching his head over today’s rally (though it could also be the lice). The good news is that the budget deficit fell to $136B (and for those of you scoring at home $136B might be more than the price of all of the tea in China) thanks to higher tax receipts. Money McBags is not clear where the higher tax receipts came from as unemployment has remained the same so perhaps it is from people filing their quarterly capital gains taxes which should have been higher with the strong market rally which has now fallen faster and harder than Money McBags did for the lovely Amanda Seyfried. So we’ve got that going for us. In other US news, the trade deficit widened and housing foreclosures fell largely because banks have run out of repo men as bank repossesions reached a record high last month. While fewer foreclosures are good for the markets, the reason for it is as positive as saying fewer people walked out of the last Robin Williams movie (since of course fewer people attended). Finally, new claims for unemployment came out today and were worse than analyst guesses as claims fell by 3k to 456k. Making things more confusing was that last week’s new claims for unemployment were 453k so once again the (No) Labor Department has either confused the basic tenets of addition, lost some beads off of their abacus (no doubt purposely taken off to replace one of the office’s missing anal beads that likely got lodged in Hilda Solis’ shapely derriere during the department’s recently passed Memorial day picnic), or is just MAKING THE FUCKING NUMBERS UP. Last week Money McBags wrote how 460k -10k somehow = 453k and now the (No) Labor department is at it again by restating last week’s number from 453k to 459k, which is how this week we get 453k – 3k = 456k. So last week’s disappointing number was actually more disappointing than previously thought (which Money McBags predicted) which makes the new claims for unemployment numbers now less believable than Ellen Degeneres as a romantic lead (like in the ironically named Mr. Wrong, and of course what was wrong with Mr. was that he peed standing up). The market seems to think that continuing claims falling by 255k to 4.46MM is good news except for the fact that: 1. It’s not clear that the 255k drop wasn’t just people exhuasting their benefits, having been unemployed longer than the making of The Man Who Killed Don Quixote has been in production. and 2. 4.46MM people unemployed is still a fuckload of people. But hey, rally on my freinds, rally on.
In stock news, just about everything was up except for GS which has broken through their $135 support level on their way towards extinction. It will be interesting to see how aggressive the government goes after itself (I mean Goldman) because even Meagan Cheung could find fraud on their trading desks. Also, BP rose 6% after Jim Cramer finally said to sell which once again proves his ability to be negatively correlated with the markets. That said, Money McBags wouldn’t go near BP unless he were wearing an extra strength contamination suit and had a lifetime supply of Lamivudine.
In small cap news, KITD hit its first short squeeze and jumped 8%+ and Money McBags hopes this is the first of many while MLNK was up a bit after crapping all over itself with yesterday’s earnings announcement. Money McBags is short on time today but tomorrow he will break down MLNK’s shit awful Q where their EBITDA dropped in half, their cash flow barely broke even, and they continued to pawn it off on new business taking longer to start-up. Wow. You know what Money McBags calls it when your new business takes longer to develop? Deep doodoo, and yes that is a bit of a technical term.
6/7/10 Midafternoon Report: Hold on to your shorts as market continues on wild ride down
Jun 7th
The market was chugging along today, taking a brief respite to lick its wounds after Friday’s jobs report gave even the most virulent Bull a bad case of Foot in the Mouth disease, until it dropped precipitously in the last half hour like Helen Thomas’ reputation at a B’nai B’rith fundraiser. With Europe’s ongoing debt problems and the US’ stagnant at best job growth, investing long in the market remains more perilous than fighting a land war in Russia in the deepest of winters (though not as deep as Money McBags would go in Ophelie Winter) or challenging Anamika Veeramani to a spelling bee (or just challening Anamika Veeramani to spell her name). The US news that had the most effect on the markets early today was that Goldman Sachs was issued a subpoena from the FCIC, also known as the “too little, too late” commission. Money McBags eagerly awaits the FCIC’s findings in several years, after no doubt much excrutiatingly toilsome research and much tax payer money has been spent, where they will 100% determine that we are fucked (of course we could save the time and money and just look for the reset button, but that would be too easy). Seriously, that we need a 10 member commisson to figure this out makes as much sense as firing an employee because she is too hot (reason #989 why C is going to $0. And as an aside, if Money McBags owned a bank, he would hire Ms. Lorenzana to manage his branch deposits anyday). Anyway, the subpeona was issued as Goldman refused to submit documents the commission requested and when reached for comment, a Goldman spokesman said they just wanted to see if FCIC Commissioner Heather H. Murren would deliver the subpoena in person. All along, Goldman Sachs has maintained that the suit is “unfounded in law and fact” and if one can’t believe what a company that has manipulated the market while bringing in absorbitant profits and destroying value for average citizens thanks to their buddy-buddy taint tickling relationship with the federal government says, then whom can one trust? As Money McBags has maintained all along, Goldman and every other Wall Street bank were complicit in the destruction of the US financial system and it would be easier to find incriminating evidence on them than it is to find rolls of back fat on a topless, sunbathing Kathy Bates, you just need to find someone with the stomach to do that dirty job. So it’s good that the FCIC is trying to grow a sac and go after them, but until they actually make some charges, this is all still lip service (though if the lip service is coming from the aforementioned Heather Murren, perhaps it’s not all that bad).
Internationally, German factory orders apparently grew faster than the cells of Henrietta Lacks as they surged due to the weaker Euro, increased private sector investment, and the uptick in demand for industrial strength floor buffers to help clean up the sets of Germany’s growing scat film industry. Orders were up 2.9% in April from the 5% they were up in March which for the first time ever makes Germany Europe’s shining example. Also, Hungary is still in the news as investors continue to try to find it on a map and wonder if to solve their financial crisis they should just gobble up Turkey. Hungary’s financial crisis is the biggest turd to hit the country since the famous Diet of Turda in 1558 which established the freedom to practice Catholicism, Lutheranism, or by the name, apparently coprophagia. Finally, fears are starting up again that China is increasing prices which will cause world wide inflation as they raise the minimum wage by 20%, though it will still leave workers wanting more half an hour after they receive their paychecks. However, if China unpegs their difficult to spell renminbi from the dollar and allows their currency to appreciate while the their own product prices increase, foreign exports could become more competitve than Alan Greenspan at a bubble blowing contest.
In stock news, BP is showing their first signs of progress in stopping the oil leak which is destroying the Gulf and causing the slogan “drill baby drill” to be returned to Peter North where it rightfully belongs. At this rate, the oil leak will be stopped and cleaned up somewhere around the time Paris Hilton finds some dignity. Also, Money McBags favorite Dick “don’t call me Richard, or Rich, or Rick, or Rightaboutanything” Bove (and again, Bove rhymes with “Oy vey”) lowered his price target on BAC yet maintained his buy rating, mimicking his brilliant market call of Lehman right before they collpased. Bove cited increased regulation, foreign exposure, and his lack of understanding of the financial markets for the price target cut. Finally, BMY shares are taking off today as they announced that their experimental drug for skin cancer was found to extend the lives of patients with incurable melanoma by 4 months. Patients were ecstatic, until they were told that four months that were being extended were Winter.
In small cap news today ISLE is falling back to where it was pre-earnings and after earnings Money McBags said the jump up was likely a quick short squeeze as the stock wasn’t cheap and the company is debt-ridden, and features bleaker properties than the Detroit version of Monopoly. Not only is ISLE falling but WGO is finally ticking down under $11 on its way to $7.50. The price of this stock makes less sense than the 11 dimensions of M theory or any song by the Black Eyed Peas. And look out tomorrow for MLNK earnings. Money McBags has written about this company many times as it is cheaper than a kissing booth being manned by Gabourey Sidibe after she downed a gallon of extra spicy garlic fries and 2 liter of Dr. Pepper. It is trading at 3x a run rate EV/EBITDA with 50% of their market cap in cash. They key to tomorrow’s release will be their cash flow statement to see if they were able to avoid burning cash as their business will likely have another sluggish quarter (according to them, though Money McBags doesn’t quite understand why, since their biggest customer HP had a good Q, but perhaps tomorrow they’ll make it more clear). So look for the release because when the markets get better (which is sometime between 2015 and the next Galactic Empire), this stock should have some nice upside with its current limited downside (again, barring a huge cash burn this quarter).
