Posts tagged China
11/16/10 Midevening Report: The Suck of the Irish
Nov 16th
The market crumbled today like Charles Rangel’s reputation as apparently Europe went through the TSA’s new back-scatter x-ray machine and was revealed to have a severely dangling Ireland. In addition to Europe being on the verge of another meltdown (or just a continuation of their previous one), China is trying to regulate inflation, and the Fed’s asset buying strategy continues to confuse politicians like global warming, health care, and honesty.
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The biggest news of the day though was that Ireland is in talks with everyone from the EU to the IMF to NAMBLA to try to reach a deal to help them meet their spiraling budget deficit. A bail out would allow them to avoid having to go to the bond markets to raise more debt where yields on Irish bonds continue to spike faster than a college student’s heartbeat after shotgunning a Four Loko (incidentally, the FDA is set to soon rule on Four Loko and their ilk and early word is that they are likely to rule them “awesome”). The hold up in reaching a deal seems to be Ireland’s desire to find other ways to turn the country’s fortunes around such as the brilliant new business strategy of locating themselves next to twitter’s offices and hoping for a business plan to emerge through Porter’s 6th and most important force: Dumb fucking luck (and for those aspiring dick joke writers out there, Money McBags’ dining room table has three vacant seats for the highest bidder).
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If a bailout can’t be reached, Ireland may have to resort to selling some natural treasures such as the Blarney Stone, Michael Flatley‘s shaved chest hair, and Katherine Jenkins, in order to raise funds. That said, Money McBags doesn’t care which international organization jumps in (as the only international organization he fully supports is the Ukrainian Femen) so someone should just bail Ireland the fuck out (and the probability of that happening is whatever is higher than 100% likely) and celebrate over some pints of Guinness, or Europe should finally disband the whole fucking EU and be done with the charade of a unified Europe. It didn’t work in the 1940s and it probably won’t work now.
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But it’s not jut Ireland that is giving Europe problems today as Austria is dropping all kinds of schnitzel in the punch bowl by claiming that Greece has not lived up to their bail out promises. Citing the EU having to increase Greece’s budget deficit three times already from “likely insolvent” to “Stephen Baldwin insolvent,” Austrian finance minister Josef Proell got his bah humbug on and said that his country has not yet submitted their December contribution for Greece’s bail out. While Austrian models continue to show Greece’s economic situation as being dire (and if one of those models is Nicola Mar, then kudos to Austria’s economists), Proell toned down his statements later in the day to say he thinks Greece is “on a good path” before mumbling “in bed.”
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The market also tumbled today as a result of rumors that China’s government will take steps to curb inflation such as raising rates, instituting price controls, and sending inflation to its room before dinner. Chinese shares dropped 4% on this news as price controls could eat away company profits faster than Kirstie Alley on a bender.
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In US macro news, wholesale prices rose by .4% which was below analyst guesses of .9% and was driven by gas prices rising 9.8% (and we saw that in yesterday’s retail sales numbers as well). That said, if we get our Fed on and just look at core inflation (because why give a shit about the things that people really need to spend on such as food, gas, and botox injections), we see that core PPI was down .6% which was the biggest drop in four years and was led by a 3% drop in car prices and a 4.3% drop in pick-up truck prices. Of course finding out that expensive discretionary products need to be discounted to sell is less surprising than finding out kids who go to Yale are douchebags, so big fucking “duh” (Note to loyal readers of the award winning When Genius Prevailed, remember this bit of info for WGO’s Q. And yes Money McBags is still short).
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In other US macro news, home builder sentiment rose by 1 to 16 in November which means absolutely nothing to Money McBags except that anything under 50 is considered to be negative so anything under 20 must be hella fucking negative. Finally, industrial output was weaker than expected ending today’s run of “who gives a shit” US macro news.
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In the market, WMT put up a good Q and raised earnings guidance despite weakness in US same store sales as their customers continue to struggle with high unemployment rates and finding the right fashions. Same store US sales were down 1.3% which was the 6th consecutive quarterly decline as non-discretionary items continue to struggle worse than sales of The Economist’s first annual Swimsuit Edition. HD also put up a good Q, and raised earnings guidance thanks to better cost controls and sales of dollies to help people move out of their foreclosed upon homes. That said, they did lower their full year revenue guidance a bit as according to their CEO “the economy is still a bit fucked up.”
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And here is something of which to make note (while here is something of which to make more than a note), retailers SKS, ANF, and TJX all put up good Qs and yet all struggled in the market today which usually means earnings have now been more than fully priced in and the sell off will start gaining steam. Finally, MAT rose sharply after it was announced that Carl Icahn had started accumulating a position and that the company is going to use its balance sheet to buy back stock, raise their dividend, and buy enough material to finally give Ken dolls the proper anatomy.
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In small cap news ZAGG continues to sell off as the dump part of the pump and dump momo strategy may be kicking in. The stock is down 20% since the middle of last week despite a decent quarter offsetting their fuck awful business model. For those who missed Money McBags’ analysis on Friday (though why would you have?), he went in to more depth on this shitty little company than even the most bored sell side analyst, so give it a look as there will eventually be much more money to be made on the short side here.
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Speaking of shorts, a small shitty company that Money McBags hasn’t look at in a while, INTX, put up their Q today and traded off ~7% after a strong run up over the past few months. This company basically co-markets an identity theft product with banks and other organizations called Identity Guard which somehow helps protect consumer information from being stolen by those pesky Nigerian princes. Money McBags understands what it is like to be the victim of identity theft since the comment in this article was not put there by him (and note to whoever did that, if you’re going to use Money McBags’ name, at least put a fucking link to his site as well), but that said, buying identity theft protection is as fucking discretionary a purchase as there is in this economy, more so than Snuggies, Shake Weights, and ZAGG InvisibleShields.
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Money McBags main problem with this company is that the product is basically a new kind of insurance and anyone who hasn’t been a victim of identity theft isn’t going to drop $18 a month for something they don’t understand, while people who have been victims of identity theft are already likely so fucked it doesn’t matter. The point is, the product is a difficult sell in this economy (or any) and the company has stopped growing and struggled to find new products or areas of growth.
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Money McBags wanted to go through their P&L and balance sheet today but the company didn’t include one in their release which is hella fucking shady for an already shady company, especially as their release is littered with things like “discontinued operations,” “loss from operations” in some business units, and just a fuckload of jibber jabber. Shit, Money McBags has an easier time reading the fucking Torah going from left to right (though he reads no Hebrew from right to left either, but whatever) than he does reading that earnings release as it is more difficult to follow than an MC Escher staircase.
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They confusingly raised their dividend to $.15 a share (which is a spanktacular ~6% yield) but also said “Intersections’ management continues to assess market conditions for financing alternatives that may be used to increase the company’s debt, with the cash proceeds potentially being used to pay special dividends and/or make stock repurchases, as directed by the company’s Board of Directors” and in the presentation have this line: “While the company expects to continue to pay dividends on an ongoing quarterly basis for the foreseeable future, any future dividend payments will be reviewed individually and declared by the Board at its discretion.”
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It’s all terribly confusing made more difficult by their failure to include a balance sheet which makes it impossible for Money McBags to understand exactly how much cash they have to support this dividend and why the fuck they are raising it and then talking about bringing in more debt to support it.
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So without any better insight than that, keep an eye on this as a short since it has had a strong run, is no longer growing (customer accounts declined from 4.3MM to 4.1MM), and now seems to have some bizarre cash management/capital structure strategy. When their 10Q comes out*, Money McBags will take a closer look, and when Piranha 3D comes out on video, Money McBags will take a closer look at that too.
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*Money McBags sees that their Q is out and they have ~$33MM cash and ~$23MM debt. But as he doesn’t feel like rewriting what he just wrote, he’ll try to dig in more in the next few days. Just be aware that this is a tiny company with likely no coverage and no one paying attention so you have to be nimble on your short.
11/11/10 Midnight Report: Nuthin’ but a G-20 Thang
Nov 11th
The market slid today as Cisco spooked investors with a bad Q as they are still struggling to come up with a hit after the Thong Song, the G20 meetings proved to be less positive than a Helen Thomas pregnancy test, and macro news was more non-existent than dark matter (for now), as bond markets, banks, and government offices were closed for Veterans Day.
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Given the lack of macro data, allow Money McBags to take a paragraph or two for a rant. You see, the 17%+ U16 unemployment rate, the continued devaluation of the dollar, and inability of anyone to work together to want to fix the stumbling (stumbled? Fucking stumbled?) economy is more mind boggling to Money McBags than super string theory or the concept behind this show called Bridalplasty (and Money McBags only hopes that the show’s winner chooses “brain transplant” as her elective surgery).
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Look, Money McBags believes that there are smart people in the world and finding a solution really shouldn’t be this hard. For fucksake, humans have been able to send a man to the Moon (and if you haven’t noticed, the Moon is really fucking far away) just so he could hit a golf ball and even made him gourmet food for the next trip up, they have been able to create a mobile phone that tests for STDs (so now putting your phone on vibrate and shoving it up your ass will be both enjoyable and diagnostic), and they have been able to pretty much recreate the Big Bang which happened so long ago, Joan Rivers was still on her first sphincter (and by Big Bang, Money McBags is not talking about Desiree Devine). Honestly, these are all amazing achievements and proof of real human ingenuity so why is our only strategy for fixing the economy the same strategy that has consistently not worked? It’s like everyone just keeps hoping someone will waive their magic wand, say Beetlejuice three times, and everything will be better. But that just isn’t going to happen.
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Money McBags has thought long and hard about this (and long and hard about this too, but thats just being crude for crude’s sake, so feel free to ignore it) and he certainly doesn’t have all of the answers (though for a start he recommends filling in C all the way down as that seemed to work all on all three levels of the CFA exam. Or is it more correct to say the exam to get one’s CFA Charter?), but come on people, doing the same fucking thing of putting more money into the system so rich people might increase their marginal spend by a nut hair isn’t going to do it.
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So ladies and gentlemen, for the love of Gracie Glam can we all just agree to put partisan bullshit aside, tell the Art Laffers and Robert Reichs of the world to shut the fuck up (while remembering not to feed them after midnight), and forget about all of the money Goldman piled in to your campaign funds, and talk through the issues logically and figure out how to get people back to work? It’s assbackwards thinking to assume that printing money will somehow lead to real recovery and not hypervention and the even worse hyperinflation, so lets all throw away our Principles of Macro Economics (which by the way, if you read the fine print says none of it works in the real world and yet we are, um, trying it in the real fucking world) and figure shit out. Seriously a man hit a fucking golf ball on the Moon, if we can do that, we can get people producing shit again, it shouldn’t be this hard (and yes, that is what she said). Rant over.
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As for news today, the G20 Summit continues to dominate headlines with G20 members all trying to find the right spot to make their currencies come together. At the meetings, China and the US keep going back and forth about whose currency devaluation is fucking the global economy worse in the least interesting game of “He Said-She Said” since any of those awful Meg Ryan-Tom Hanks movies. China claims that QE2 will have dire implications not just on their economy but the economies of other developing countries as well and will be disruptive enough to potentially cause their citizens to be forced to dine on three helpings of cock soup a day for sustenance. Meanwhile, the US claims that China is just being a bunch of fucking asshats by artificially keeping their currency low enough to make US products uncompetitive. Money McBags is sure nothing will come out of this, like a euthanized penis, but he fully expects the end of the G20 to feature many hand shakes, smiles, and pats on the back because hey, free weekend vacation.
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Aside from playing currency chicken with China (and Money McBags believes “currency chicken” is also #84 on your local Chinese restaurant’s menu), the US and South Korea failed to work out a free trade pact. The biggest sticking point involves auto imports where South Korea continues to insist on stringent emissions standards for vehicles and the US continues to insist that South Korea shut the fuck up. Also up for negotiation are tariffs and restrictions on US beef exports to South Korea which were raised a few years ago after an outbreak of Mad Cow disease (from the Latin “Pissedoffious RoseanneBarrium”). Failing to seal the deal with South Korea may keep Obama from the cool kid’s table at the G20 meeting.
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Internationally, the cost of debt in Ireland continues to soar with five-year credit default swaps on Irish government debt rising by 29 bps to 607 bps, as the Irish economy sputters worse than the Statutes of Kilkenny in the late Middle Ages. Money McBags keeps saying it but Europe is nowhere near as solvent as people who shout really loudly might think it is so be very very careful about getting involved in anything European, unless it is Veronica Varekova.
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As said earlier, CSCO tumbled ~15% today after announcing a quarter that missed all kinds of guesses as apparently CEO John Chambers has moved from being “unusually uncertain” to pretty fucking certain that the economy remains shitty. Chambers warned of short-term challenges in Europe, in public sector spending, and in the marketing plans for Phillip R. Greaves’ opus. CSCO also saw weakness among its most important customer segment of service providers which is about as good for their business as shotgunning cans of Four Loko is for college students’ memories of where they left their pants the night before.
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2011 revenue growth guidance was 9%-12%, below analyst guesses of 13% and guidance for Q2 earnings per share was $.32 to $.35 well below analyst guesses of $.42. According to CEO Chambers: “We got a couple of air pockets here that surprised us, and I wish we were smarter on that,” though Money McBags is sure Chambers prefers that it was air pockets and not Alabama hot pockets causing the problems (and Money McBags does not recommend you click on that link. It’s safe for work, but probably not safe for your common decency, just don’t blame the messenger).
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In other market news, after taking off their figurative Jimmy hats, Siemens spewed upward after forecasting growth and raising their dividend. The company is increasing its dividend from 1.60 euro to 2.70 euro which is the first increase since 2007 and has investors receiving bigger shots of money from their Siemens shares.
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Viacom was up after better than expected results thanks to their MTV unit led by “Jersey Shore” which simply breathed on competition and gave them all fiscal herpes. Wal*Mart said they will be offering free shipping on 60k items this holiday season including cardboard boxes to smaller competitors who will likely be put out of business by this move. An analyst from Cleveland Research warned that WMT is struggling to hit their topline and this free shipping move reeks more of desperation than an overweight single 30 year old woman flying solo at a wedding. Finally, LVLT won a multi year deal with NFLX and rocketed up because anything that touches Netflix turns to whatever is more expensive than gold (such as Bar Rafaeli‘s vagina). That said, there are over 1.3B people in China and if all of them sign up for at least two Netflix memberships, then NFLX will be properly valued.
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As for small cap stocks, ZAGG was down ~13% and Money McBags listened to their conference call and thought it was OKish. Money McBags still has some questions so he’s waiting for the transcript of the call to come out to make sure he heard them correctly before he breaks it down. They demolished guesses but didn’t raise guidance which is one red flag (unless Money McBags missed that part of the call, and as always, he multi-tasks when on earnings calls so sometimes he is so focused on guessing muffs that he misses a few minutes here and there), the other is trying to understand what the fuck they were babbling about with their patent acquisitions and investment in HzO which somehow will let people use their iPhones underwater (which seems about as practical as making iPhones work under the gravity of the planet Uranus, but whatever). Money McBags hopes to have his analysis of them tomorrow but time has not been his friend lately.
11/10/10 Midnight Report: Will Obama be Seoul Man Defending Fed at G20
Nov 10th
Marginal macro news, the upcoming G20 meetings, rising commodity margins, and enough uncertainty to make even Heisenberg jealous had the market once again bobbing up and down like Shyla Stylez trying to make her rent. We remain at a confusing time with economic data saying the market should go down (that economic data being a U6 unemployment rate higher Charlie Sheen’s blood alcohol level on a Wednesday night, massive government debt that might even turn the immortal John Maynard Keynes into to an Austrian, and the world’s global reserve currency fast on the way to becoming more worthless than a Chubby Cox rookie card) and yet algorithms, blind hope, and the Bernanke Put potentially lasting to in-fucking-inity keep supporting the market and edging it higher.
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The bad news is that the day of reckoning may be coming, the good news is that nothing has collapsed yet, and the better news is that you can now use Facebook to tell the world that your boss is an assclown and not suffer any consequences (of course since Money McBags has no boss and still can’t get his own Facebook page, that doesn’t do much for him).
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That said, there was a plethora of macro data out today as President Obama finally touched down at the spot of the G20 meetings and told the other 19 Gs to calm the fuck down about currency wars. In a letter to other leaders, the President said that US growth is the most important contribution the country can make for a global economic recovery (other than auctioning off a threesome with Raven Alexis and Audrina Patridge), that the strength of the US economy will determine the value of the dollar (horse meet cart, now get the fuck behind it), and that LeBron James is a bitch.
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New claims for unemployment dropped to their lowest level in four months (until they are revised upwards next week) and registered 435k, down 24k from last week’s upwardly revised 459k or 22k from last week’s announced 457k as the “Hold the shock and hope for no awe” strategy once again rears its ugly head. Analyst guesses were for 450k so Money McBags would like to applaud them for at least getting the direction correct seeing as how not only are they relying on outdated assumptions of normality, but they are also guessing at completely made up data.
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In other news, the trade deficit narrowed in the US as the weak dollar helped exports grow a whopping .3% to their highest level since 2008 when the Kim Kardashian sex tape first got international distribution rights. Also, mortgage loan applications rose 5.8% but still remain at historically low levels as “buying a new home” ranks up there with “getting involved in a land war in Asia,” and “investing money with Bernie Madoff” on Americans’ to do list.
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In stark contrast to the US, China’s trade surplus rose once again thanks to the Chinese government continuing to manipulate down the value of the Yuan and a surprising increase in the demand for pee pee flavored Coke (no joke). While China’s trade surplus jumped from $16.9B to $27.1B the Chinese government decided to tighten bank rules in order to cool off their housing market which is expanding at a pace slightly quicker than whatever the pace is that causes bubbles (perhaps really fucking quick or quicklicious). With real estate in China threatening to mimic tulips in the Netherlands in 1637 or two lips of Brooklyn Decker wherever she goes, the government is now requiring banks to raise their reserves by half a percentage point which is the fourth such increase this year (with the fifth of course to come next month).
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In the market Boeing crashed ~3% as their new 787 Dreamliner had to make an emergency landing as perhaps it was dreaming of Heather Vandeven which caused the lining of its circuits to short. As a result of the jet now being 3 years behind schedule and still working about as well as Carnie Wilson‘s lap band surgery, Boeing was taken off Goldman’s conviction buy list and told to go to their room and not come out until they understand how they made the Goldman analyst feel.
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Elsewhere, everyone seems to be raising their hands and shouting “I want BJs” as BJs Wholesalers shot up on news that the board is looking to sell the company. The company is rumored to be licking their lips over a ~$2.75B offer which would make it the most costly BJ since Monica Lewinksy frequented the oval office. Morgan Stanley was hired to give heads up advice and lead the deal team and they hope to have the sale humming along in no time.
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Also, GM posted a $2B profit as they prep for their upcoming IPO and hope investors forget that they are a shittily run company while AIZ tumbled ~11% even after assuring investors that allegations of their policies for something called forced placed coverage being nefarious are way out of proportion, like Mayim Bialik’s nose or Paul Krugman’s reputation. Finally Polo Ralph Lauren galloped up ~8% after beating analyst guesses and raising guidance for the year. The company cited strong growth in footwear and apparel as well as “looking like a douche bag” being back in style.
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In small cap news ZAGG put out their earnings release and had their call after the close which Money McBags has yet to listen. That said, in going through their release they had a surprisingly good Q (except for their gross margin falling again because, you know, stuffing channels isn’t as easy as it seems). Revenue was up ~135%, eps was up to $.16, and they seem to be happy with their AT&T partnership. As loyal readers know, Money McBags likes this company about as much as he likes G-rated movies or DCF valuations (well to be fair, he likes the theory of DCF valuations, but as for their execution, well, he is all for it). ZAGG’s long-term business model, which relies on one over-priced commodity product to which they don’t even own the patent, is less likely to remain a successful strategy than Jimmy McMillan’s campaign strategy for Governor of NY or . That said, on the surface their earnings look good so Money McBags will give them their due and hopefully break them down later this week after he goes through their call and their 10Q.
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In other small cap news, Money McBags had time to got through DFZ’s call today as he promised and it was not as splenderiffic as he would have hoped. The stock dropped ~15 minutes in to their call yesterday but at that point they had just reasonably finished explaining why their margins shrunk (due to increased late deliveries that had to be airshipped and not due to price discounting or a company wide boondoggle at their local Rick’s Cabaret). That said, on the call they warned of input prices rising (though not as much as Natalie Dylan’s input), sales in the first 7 weeks being a bit disappointing, and seeing some softness in cold weather goods including furry slippers (and the fact that there is no definition for “furry slippers” on Urban Dictionary has made Money McBags lose a little more faith in humanity).
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So Money McBags forecast may be tempered a bit. In his last breakdown he guessed that they will earn ~$.87 in fiscal 2011 based on 4% topline growth 40% gross profit margins and $36MM SG&A. If those margins slip to ~39% then we’re looking at closer to ~$.80 per share. The company is trading ~$10 but should have at least $4.50 in cash on the balance sheet at years end which means they are trading at ~13x that low end $.80 eps estimate or 8x the estimate plus the cash. So even if they struggle a bit, they are still pretty cheap.
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Of course none of those projections really matter because they reiterated that they are going to make an acquisition within the next 12 days, so if you want to invest in this company ahead of that, you have to feel confident that management knows what they are doing and isn’t going to screw up an acquisition worse than John Tyler screwed up the Whig Party or an 8-ball screwed up River Phoenix. Money McBags thinks the stock is cheap enough that there is a decent margin of safety, but he’s not sure what the upside is until he knows what they buy, so if you don’t own it now, probably no reason to jump in here.
11/9/10 Midevening Report: As QE2 Hangover Wears Off, Will Market Wake Up in A Pool of Its Own Volatility
Nov 9th
It was another lackluster day in the market as investors are still trying to regain their bearings from last week’s quadruple news high of elections, QE2, the jobs report, and Kat Dennings nude photos being released. With all of the excitement of those events more than priced in to the market, investors have spent the last couple of days trying to figure out why printing a fuckload more money is good, how 17% (+/- “oh shit”) unemployment is healthy, and who the fuck cares that Conan O’Brien returned to TV (seriously, the last time Money McBags watched a late night TV talk show was before DVRs, the internet, and shaved bush was in style). With news at a plateau as earnings season winds down, the market should struggle to find direction more than one of Randy Quaid’s kids.
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That said, macro news today was relatively light and irrelevant like CNBC or the SEC’s findings on the flash crash (or the mini flash crashes that keep happening and will continue to happen until someone finally shuts that bastion of evil and market manipulation down known as Waddell and Reed. Shit, Money McBags has no idea why the Pentagon is wasting so much energy trying to figure out who fired a missile off the coast of California when we all know it was just some douchewad trader at Waddell and Reed trying to beat Joshua in a game of Global Thermonuclear War during his lunch break).
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Small business optimism rose from “we’re totally fucked” to “50% off sale.” The National Federation of Independent Business (and it would be too easy to point out the oxymoronic nature of a federation of things that are supposed to be independent) said its small business index for last month rose 2.7 points to 91.7 which was the third consecutive monthly rise as well as the 34th consecutive month below 93. Now Money McBags has no idea what the difference is between 91.7 and 93 (except for 1.3) but when he writes it that way, it makes things seem as ominous as an invitation to participate in a Goldman MBS offering, and almost makes Money McBags feel like the muckraker he has always wanted to be.
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Elsewhere wholesale sales were up .4% which was smallest increase since June while wholesale inventories skyrocketed up 1.5%, doubling analyst guesses and signaling companies are ramping up on pre-marked down items. This jump in wholesale inventories will make Q3 GDP look better (though not this good), but realistically, rising wholesale inventories may signal the economy becoming more backed up than a constipated John Edwards (because that guy is completely full of shit) as retailers stocking up for the holiday season may wind up more disappointed than Lisa Marie Presley on her wedding night or any jackass who is selling all of his worldly possessions in anticipation of 12/21/12.
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Finally, the (No) Labor Department released data showing that job openings decreased by 163k in September to 2.93MM which means ~6 people are vying for every opening (unless that opening belongs to Brooklyn Decker, and then there are at least 60MM people vying for it). That said, two month old data on job openings is about as useful as a regression model with correlated errors so unless Money McBags finally discovers a hot tub time machine to go back to two months ago when that data may have been 1% useful (and trust that Money McBags has tested many hot tubs to find such a feature), he is going to give this a big fucking yawn. That said, Money McBags hopes the (No) Labor Department can find something more constructive to do with their time like find people some fucking jobs or figure out how this guy got a mouse up his ass (And if Money McBags ever gets caught with anything up his ass other than Kate Bosworth‘s tongue, he will also say he doesn’t know how it got there).
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Internationally, the yuan is at its highest level vs. the dollar since 1993 thanks to Benny B. getting his quantitative ease on and testing to see if he can make that which grows on trees worth more than money, thus putting an interesting twist on the old saying. Coming on the heels of this (like a determined podophiliac) is news that Chinese rating firm Dagong Global Credit Rating has downgraded their credit rating of the US debt from AA to A+ claiming the US economy is more virtual than Farmville’s. They also said, and to loosely translate because Money McBags’ Mandarin is still very bad, US GDP will continue to “eat a bag of dick for the foreseeable future.” But it’s not like the US relies on China to continue to sell debt to in order keep the economy going, so no big deal. Oh wait, shit.
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In the market, Ambac finally filed for bankruptcy in the least surprising news since finding out that a priest may be in to porn as apparently insuring all of the shit that destroyed the largest global economy is a less profitable business than selling copies of Strunk and White at a Tea Party event (or to Money McBags).
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As far as stocks go, Priceline was bid the fuck up after putting up its billionth consecutive huge quarter thanks to strength in international bookings, hotel bookings, and car rentals. Revenue was up 37% and EPS was up 57% to $5.33 which easily beat analyst guesses of $4.97 per share and was enough to win them a room at the Columbus, OH airport Hilton Suites. Also up was YHOO as the internet space rallies like it is 1998 when sites like hotornot.com were considered revolutionary and valued at the same levels as small Indonesian countries. YHOO was up on rumors that it is a take out target because apparently Pointcast and Geocities were asking too much.
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Finally Dean Foods was down ~18% as a result of higher dairy costs thus figuratively squeezing the teet on which the company feeds and Sara Lee announced they are selling their North American bakery business to Grupo Bimbo from Mexico which in English roughly translates to “Group of Paris Hilton” (and yes that was a fucking horrible pun, but you get for what you pay, and Money McBags puts no value on your dignity).
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In small cap news today, one of Money McBags’ favorite shorts, WGO, dropped ~7% today on no news other than perhaps common sense. Also, EBIX put up their Q today and once again had spanktacular growth with revenues up 43% and earnings up 77% or up only ~35% once you strip out their one time gain recognized in regards to the decrease in the fair value of a put option issued by the company. So they actually had negative operating leverage as costs were up ~300bps but Money McBags would have an easier time deciphering the Rosetta Stone or getting a blumpkin from Queen Elizabeth II than he would of understanding this company’s financials (same goes for their auditors which is perhaps why they keep hiring news ones).
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Their income statement and balance sheet remain a riddle wrapped in an enigma and covered in shit which is why months ago Money McBags told you all to either stay the fuck away from them or put on some kind of options straddle (and Money McBags would take the option to straddled this) because EBIX is either worth 2x what it trades for or is a complete and total fraud and worth nothing. Money McBags honestly doesn’t know the answer to that but anytime he runs in to a business with that kind of growth with a business model that requires drawing a 3D matrix and praying to the God of What The Fuck is Going On just to understand what they are doing, all kinds of red flags go up.
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Also, DFZ put up their Q today and Money McBags exhaustively broke down their last Q a few months ago in ways that would make the sell side blush. This Q was more of the same in that they continued to have decent growth and continued to execute. Revenue was up 23% y/y to ~$36MM and EPS was up 81% to $.37. That said, before we go out and buy the lobster tails and properly freshen up our junk to celebrate the jizztastic quarter, in the press release, management said sales were pulled forward by ~10% from next Q so if we knock 10% off of revenue and cost of revenue we get a ~11% topline increase and a ~16% bottom line increase. Still very good, and consistent with the message of this company, but nothing to get overly excited about, like the Amanda Seyfried lesbian scene in the movie Chloe (and yes that is the safe for work version).
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They have ~$23MM of cash on the balance sheet, up from $18MM y/y but down a fuckload sequentially as this is the Q they have to ramp up on inventory. They also raised their dividend to $.07 quarterly from $.05 and fired a board member to cut costs (and Money McBags can’t figure out if it is good that they cut dead weight or bad that they had to cut a director who had been with the company for 60 years, no joke).
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The stock was down ~5% on the day despite the decent Q and dropped precisely 15 minutes in to their call so they must have either said something about a pending acquisition (which they keep saying they are going to make) or given some sort of shitty guidance but Money McBags didn’t have a chance to listen to the call or read a transcript yet. Given that, Money McBags is keeping his valuation and thoughts inline with last Q (he guesses they should be worth ~$12-$14 absent a big acquisition) and hopefully tomorrow he will have time to be able to figure out what the fuck they said on the call to cause the stock to drop. He knows it is sloppy analyst work to go through the Q without listening to the call, but he wanted to get you some information rather than none, so it is what it is.
10/28/10 Midnight Report: Investors debate size of QE2 and wonder if it will suffer from shrinkage
Oct 28th
The market held steady today as headline-y good macro news was mixed with a dose of disappointing earnings news and topped off with a healthy heaping of who gives a shit. That’s because with mid-term elections looming and everyone waiting to see the details of QE2 (which is now the most anticipated market event since GOOG’s IPO or JWOWW ringing the NYSE’s opening bell, and yes that really happened as somewhere Warren Buffett rolled over in his reasonably priced grave), investors are less likely to be making big bets than Charlie Sheen is to have a date he doesn’t need to tip in the morning.
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With QE2 continuing to dominate the market like a Pareto efficiency dominates a Nash equilibrium or like Orson Welles dominated a cookie (or a little something called film making), investors are speculating on how big it will be with ranges from $100B big to Whitezilla big (and google that one at your own peril). Yesterday the WSJ intimated that the Fed would start small and grow QE2 $100B at a time (known in the lending world as low and grow or inflation by 1000 cuts) while today, strategist to the stars Abby Joseph Cohen (fresh off of her landslide victory in the Ann B. Davis look alike competition where she wowed the judges by reenacting the Brady Bunch scene where Sam the Butcher brings Alice the meat) said that QE2 will be $500B to start (just to get the mood set) and then would ultimately finish off with another thrust to $1T.
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If Money McBags were a betting man, he would first take the under on wins for the Utah Jazz, and then he would take all kinds of unders for QE2 as he thinks the news is going to disappoint more than John Hooker’s performance in the Battle of Chancellorsville or the Rent is Too Damn High party’s showing in the upcoming NY gubernatorial election. And if that happens, the market will sell off from its current elevated levels in the textbook “buy the rumor, sell the news, unless the news has a hot friend who is in to threesomes” scenario.
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As for macro news, new claims for unemployment were out today and they were down to a minuscule 434k (and by minuscule, Money McBags means whatever is the opposite of miniscule, like ginormous, gargantuan, or Barbra Streisand’s nose). That said, it was the second lowest number of claims this year which should make the 434k people who just lost their jobs and the 16%-17% of the workforce who are unemployed (according to the U6 unemployment numbers) feel just dandy. That said, a few things about the numbers:
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1. New claims from last week were once again revised up by 3k to 455k in the B(L)S’ consistent “hold the shock and hope for no awe” campaign which is actually working much better than their last campaign called “telling the truth.”
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2. Analyst guesses were for claims to actually rise by 3k so not only were they off by 24k (or fewer than 24k when the number is revised up next week) but they once again lost the coin flip by not even getting the direction correct (and there is probably a joke here about all the analysts being male and not wanting to ask for directions, but if you want bad and unfunny finance humor, just go here, or re-read Money McBags’ 10/14/10 column). Anyway, this once again shows that analyst regression models continue to disprove the entire concept of the normal curves on which they are based since their guesses have failed to revert to any type of long-run mean. Why people pay for this information is more puzzling to Money McBags than why someone had a cell phone in 1928.
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3. While it’s great that only 434k people are being added to the government payrolls (and yes that was sarcasm), 414k people dropped off the emergency and extended unemployment logs and seeing as how there were negative jobs added last month, it’s not likely that these people dropped off because employers all of a sudden acquired a huge need for employees whose main skill now is knowing at what time and on what channel The Jerry Springer Show is broadcast.
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And it really wasn’t just 414k people that dropped out but regular continuing claims dropped by 122k. So look, Money McBags is no logician (though he does understand both hypothetical syllogism and Jenna Presley causing jism), but it is most likely that 90%+ of those 122k continuing claims simply shifted from the pre-long-term unemployed bucket to the regular long-term unemployed bucket. So while net 414k people are no longer receiving any benefits, its really closer to 500k gross when you add back the ~100k who just moved over from continuing claims and that should grossly effect consumer spend.
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But hey, nothing to see here, rally on because QE2 is the panacea to fix all sinking markets despite things getting hairier than Christine O’Donnell’s bush (no really, don’t shoot the messenger on that one, read the story, or skip down to ~paragraph 18. Just remarkable.).
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Internationally, China is set to once again ship rare earth minerals such as lanthanum, neodymium, and John Edward’s humility, after ending their embargo with Japan. And speaking of Japan, the Bank of Japan has detailed a plan to buy assets in their own quantitative easing which they hope will fend off both a struggling economy and Godzilla.
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The big story of the day though was earnings as 3M released a disappointing outlook despite beating earnings guesses and said if things don’t turn around, they may have to lay off an extra M. They shaved $.06 off of the top end of their full year eps guidance as a result of acquisition costs yet traded down an astounding ~6% on that which shows how much the market has run and how high current expectations are.
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In other earnings news, Kodak pictured a perfect day as the company was up ~10% after only losing $.16 per share thanks to sales of inkjet printers and licensing intellectual property such as “how to operate in a dying business.” Flextronics flexed their income statement and put up a huge Q and Las Vegas Sands jumped 10% after Charles Barkley spent a weekend on their property.
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On the negative side, Teradyne tera-dined on investor gains by issuing disappointing guidance. V beat earnings guesses but missed the whisper number and traded down (and Money McBags laughs at any whisper number unless the number is 69 and it’s being whispered by Breanne Ashley) and finally, AutoNation skidded in to a bad Q by missing estimates since people not surprisingly don’t have money to buy cars.
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In small cap earnings, IMAX shot out at investors after a good Q and announcing accelerated theater expansion and if you all remember, Money McBags had doubts about IMAX a few months ago, so fuck him on that one even though he thinks the company has run ahead of itself. FIRE put out disappointing guidance and dropped >20% and Money McBags has mentioned it being expensive before yet never dove in to it. And finally Sketchers couldn’t sneak out a good Q as they dropped nearly 20% as inventory built up faster than investors could say “dying trend.” This is the reason Money McBags avoids trendy consumer discretionary items as one never knows when that trend will be over.
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Yesterday, Money McBags mentioned SMCI’s Q and he wanted to break it down briefly as he has always had a special place in his heart for this little cyclical company that could. As for the Q, it was decent enough with sales up 2.7% sequentially but 39% y/y and net income up 86% y/y but down 6.5% sequentially even with a slight uptick in gross margins thanks to a higher tax rate and a slight increase in operating costs. That said stripping out non-cash income statement costs, non-GAAP eps was up by $.01 sequentially to $.22 per share which is perfectly fine. They still have ~$90MM of cash on the balance sheet, had ~$10MM of FCF in the Q, have no debt, and have never been in Money McBags kitchen.
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The story last Q was that margins ticked down and revenue flattened sequentially and this Q margins ticked back up sequentially (though still down y/y) while revenue again flattened. On the call, management said that y/y margin gross reduction was caused by increased costs due to overseas expansion, elevated shipping costs, and component shortages, but they expect some of that to reverse and if Money McBags correctly heard the call, they think margins should go back up another 40ish bps. So that is a slight positive.
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Guidance for next Q which is typically their seasonally biggest Q is for ~8% sequential growth but down quite a bit from last year’s blow out revenue quarter. They also guided to ~$.23 to $.27 in Non-GAAP EPS for next Q and if Money McBags takes $225MM top line, 16% gross margin, holds operating costs as the same % of revenues, taxes them at 34%, adds back ~$2.5MM of non-cash income statement items, and then does the hokey pokey and turns himself around, he gets about $.25 of Non-GAAP eps which is right in their range. So whoop de dam doo.
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The company is probably going to earn ~$.85 per share to ~$1.00 per share this fiscal year and they are trading ~$11 with ~$2 of cash on the balance sheet so they are actually pretty reasonably priced. Basically, this company starts growing when INTC releases a new chip and Money McBags doesn’t know when that will be so you don’t need to rush in to this stock, but it is decent exposure to tech trends, not all that expensive, well run, and trading near cyclical lows, so buying now and holding until whenever is fine, but it will likely be dead money for a bit if you want to try to time it better.
10/21/10 Midnight Report: The market weebles and it wobbles but the Fed won’t let it fall down
Oct 21st
A funny thing happened on the way to the frontrun today as after a huge opening driven by slightly positive relative macro data and NFLX’s jizztacular earnings, the market dove on no real discernible news other than maybe investors waking up to just about EVERY FUCKING PIECE OF ECONOMIC DATA released in the last few years (though highly unlikely). As for the real cause, well Money McBags would like to say it was common sense or gravity (that is if gravity existed) but he’s less sure why the rapid sell-off occurred than he is why people hire economists or who killed the bees (though it looks like it was a fungus tag-teaming with a virus that did it).
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News sources all say the jump in the dollar caused by traders getting their panties in a bunch about currency wars was the reason, but that is stale news and would have hit at the open if anyone really gave a shit. The most interesting reason Money McBags could find was laid out nicely by zerohedge as they postulated that the dip was triggered by the Fed’s reverse repo (which is kind of like a reverse rodeo, only a bit less romantic) which sucked liquidity out of the market like Taylor Rain on a payday. Whatever the answer, something is rotten with the state of Ben’s market and with real structural problems, one needs to remain more careful than Justin Beiber at a NAMBLA convention.
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As for macro news, it was Money McBags favorite day which of course was “New Claims for Unemployment Thursday” where the (No) Labor Department gets to perfect the government’s “hold the shock and hope for no awe” strategy. This week, new claims were down by a headline number of a whopping 23k to 452k which sounds fan-fuckingtastic if:
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1. The 23k wasn’t off of an UPWARDLY REVISED 475k from 462k. But hey, what is 13k among friends?
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2. 452k wasn’t still an absolute fuckawful number of new claims. The again, with 64k private sector jobs being added a month and only ~160k government jobs being lost a month, at the pace of ~450k new jobs lost weekly, we should be out of this recession sometime between now and when Rosie O’Donnell flies.
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3. JWOWW had not turned down playboy. And yes this has nothing to do with the number, but we can all agree it was also not fan-fuckingtastic.
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So the 452k beat analyst guesses of 455k and would have beat guesses by more if analysts had put the upwardly revised 475k in to their broken regression models as last week’s data point rather than the 462k. So while the headline number seems like a positive, remember it will be revised upwards to ~460k next week after (No) Labor Department’s analysts get through massaging the data and finishing it off with the least happy ending since Old Yeller.
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In other macro news, US leading economic indicators increased for the third straight month (and the month was so straight it refused to even look at other months of the same gender). The New York-based Conference Board’s index of leading economic indicators climbed 0.3% which shockingly matched analysts guesses for the first time since analysts were asked to guess a whole number between 1 and 3 (but to be fair, they were allowed to use their fingers). Also, manufacturing expanded in the Philadelphia region in October as the index rose to 1 from -.7 but was still below analyst guesses of 2. That said, it was the first time since July that factory payrolls grew and the fact that the index wasn’t negative is the second most positive thing about Philadalphia after “not having to live there.”
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Internationally, China’s GDP growth slowed to 9.6% though that growth rate still makes it more bubblicious than Gonzo Grape with only slightly fewer cavities. The most interesting part is that China’s CPI jumped up 3.6% to a 2 year high as a result an 8% jump in food prices. However, many witch doctors (Money McBags means economists) think food prices are really up ~30% as the market weighted basket of goods used to calculate inflation in China’s CPI model has not been updated since 1993 and thus real inflation is being distorted by the calculation using old weights and outdated goods such as McDLT‘s, and Zima.
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In the market, as mentioned before NFLX soared after a slight topline beat ($553MM vs. $551MM guesses), a bottom line miss ($.70 vs $.71 guesses) and a 52% fucking gain in new subscribers y/y which is amazing considering they still refuse to stream porn. These results drove their valuation from ridiculously overpriced to ridonkuously overpriced (and the difference between those two is like the difference between Nikki Hilton hot and Hanna Hilton hot, so it is quite stark).
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That said, an astute reader of the award winning When Genius Prevailed pointed out that without the 300% growth in unpaid subscribers thanks to extending their free two week sign-up promotion to a free month, they would have missed the consensus guess at new subs. But that is just a detail as they only have ~17MM subscribers and there are still 1.5B people in China and once inflation ceases there and those people can afford food again and thus have $ to waste on TVs and then NFLX subscriptions, the valuation will finally make sense. But if you’re going to invest in the market and want to hang with the cool kids, just buy AAPL and NFLX and watch your portfolio grow faster than the Crystal Church’s debt (but don’t forget to have a quick trigger finger because if/when it breaks, these stocks will lead the way down).
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In other earnings news, MCD served up a 10% growth in profits which beat analyst guesses thanks to smoothies and people being poor and thus not being able to eat at restaurants that serve actual food. The company had 6% global same store sales growth and said they see this momentum carrying over to Q4. As loyal readers know, Money McBags believes this is a company you should own (if you want to gamble) as global aspirational brands that sell cheap products should continue to do well when mature markets develop dementia since brand equity matters in emerging markets. Finally, EBAY went to the highest bidder today as it shot up ~7% thanks to a strong Q from Paypal as users continue to send money online to free that pesky Nigerian prince.
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In small cap news, CRUS got absolutely crushed today like they had gotten in the way of Keely Shaye Smith at two for one day at the local Long John Silver’s. The company was down ~15% on a quarter that barely missed analyst guesses and guidance that was below guesses and sequentially down. That said, their quarter was actually pretty good as revenue grew 81%, earnings rose to $.40 per share, and gross margin was up y/y to 56%.
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Money McBags thought they would have a good Q and they certainly did, though his estimates were for $.44 per share based on their guidance and they came up short of that. Numberswise, this company is still fucking cheap as they are on pace to earn ~$1.30 this year and grow revenue 80%+ and are now only trading at ~10x that, but there are three things Money McBags has learned in life: 1. Never spit in to the wind. 2. Never get involved in a land war in Asia. And most importantly, 3. Never own a growth stock when estimates are coming down. Seriously, fuck valuation, fuck common sense, fuck it all, momentum rules these names and once you lose it, it’s not coming back until you put up a couple of quarterly beats in a row.
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That said, Money McBags first told you about this stock when it was < $8 so depending on where you sold, you’ve been able to make >100%, or if you’re still holding, you are up >60%, so you’ve done well. And remember, Money McBags told you to start trimming ~3 weeks ago when he said:
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“In small cap stocks, CRUS dropped ~6% after yesterday’s rise as fears are that AAPL will be replacing them in the iPhone 5 and iPad 2 and this has been the issue with this company. AAPL basically drives their revenues right now so if they lose their slotting, they will be more fucked than Heather Mills and her partner in a three legged race. This is the reason the company is so cheap despite the fact that they have been putting up huge quarters and will put up another huge quarter shortly. Where there is smoke, there is usually Paris Hilton, but there is also usually fire and Money McBags would be trimming like shit in to this news because if it is accurate, CRUS will tumble. Just ask yourself, would I feel stupider?”
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CRUS was trading ~$18 when Money McBags wrote that so hopefully you took his advice. So while last Q he thought they would continue to put up strong numbers (and they have), it appears they are likely rubbing up against some softness (like titty fucking Christina Hendricks) and when that happens with growth companies, just get the fuck out and let value investors have their way.
10/19/10 Midnight Report: 50k iPads a day won’t keep the bear market away
Oct 20th
Timberrrrr. The market sold off today as a result of tech companies posting earnings that failed to titillate the street, China raising their interest rates to try to stave off an asset bubble that soon may be only a prick away from popping, and the rent still being too damn high. Up until now, the market had been able to continue its rally through the beginning of earnings season as QE2 was there to pump it up like the theme music from Rocky III or a good old Doc Johnson, but with QE2 now fully on the table and the debate moving from if, to when, to how the fuck much, micro news is beginning to be much more important again.
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Speaking of QE2, Atlanta Fed Bank President Dennis Lockhart seemingly reinvigorated the gold club by talking about the further devaluation of the dollar that will happen with QE2. Situated in the Fed’s underground lair in Nevada, he informed CNBC that QE2 needs to be big enough to make a difference, and by big enough, he means $100B (no really he said $100B, check the video). So once and for all Lockhart proved that size matters to the Fed and it’s not just the promotion of the notion(al). Lockhart also told viewers that QE2 will help lower interest rates (because real interest rates already below zero for the 7 year and on in just aren’t low enough) and that in turn will help consumer spending and business investment because businesses really need more cash despite the fact that they currently have hoards of it on their balance sheets. This is a more assbackwards attempt to increase consumer spend than hiring Ice-T’s wife and charging consumers for cheek shots.
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As far as Money McBags is concerned, the problem isn’t that companies don’t have access to cash to hire, it’s that there is too much fucking uncertainty for them to do anything as nearly 20% of the population remains long-term or pre-long-term unemployed. If anything, government policies should be aimed at GETTING PEOPLE JOBS so they will have money once again to spend on food, shelter, and those delicious chocolate Necco wafers. That in turn will create real demand, which will allow businesses to actually use their cash to invest in their business which equals more hiring and maybe, just maybe, an economy at least a nut hair healthier than Michael Douglas’ throat. So any government intervention (and perhaps Money McBags can get A&E to tape the intervention before the government runs out of the room in denial) should be focused on building bridges, opening tunnels, and erecting shit that will be useful in order to get people working, get money in to their pockets, and test out that the Keynesian multiplier isn’t just another irrelevant concept that doesn’t work in the real world like efficient markets, Mickey Rourke, and monogamy. Either that, or the government should leave the economy the fuck alone.
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In other macro news, new home construction was up .3% in September driven by a 4.4% rise in single family homes thanks to the Commerce Department adding card board boxes and new cars to their construction models. While construction was up slightly, the forward looking metric of permits issued (and it is forward looking because it is predictive and not because Nicole Trunfio is standing in front of it) dropped by 5.6% due to a 20% drop in permits for apartments and condos as that market has more capacity than Rungrado May Day Stadium or Kim Kardashian‘s vagina.
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Internationally, China raised their rates for the first time since 2007 to try to lift real rates above zero, cool down asset prices, and perhaps avoid a currency war that has put the US dollar in a figurative chinese fingercuff between the Yuan and the Yen. The 25bp rise in rates could signal the start of a new monetary policy to curb China’s asset inflation and that policy will have to be tighter than Kenny Roger‘s face to be successful.
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But the real story today was earnings as AAPL and IBM both mildly disappointed the Street and GS, BAC, and COF all either met, beat, or missed guesses depending on what you want to include as one-timers, earnings manipulation, and straight up fraud.
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Quick aside: Back in the day, Money McBags covered the financial services sector when he worked for the man and he quickly realized that there was absolutely no way to have any confidence in any of the numbers in 10Qs or 10Ks because an extra provision here or a different nomenclature there, and earnings would be whatever the companies wanted. Given that, Money McBags came up with a simple regression model to pick financial stocks that take balance sheet risk with the independent variables being the number of Wells notices a management team has received, the length of the CEO’s admin assistant’s skirt, the number of times the CFO says the word “risk” in a company one one one, and the color of their helmets. That model reduced his work by 99%, had an r-squared of .95, and actually gave him a track record better than the best sell side analyst who was right only 38% of the time.
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But back to the key point which is that AAPL drove the market down despite killing it with revenue growth up over 100% (~$20B vs. ~$10B last year) and iPhone sales up 92%, as they saw margins decline, sales of iPods drop 11% (though buying an iPod when there are iPhones and iPads is a bit like buying an abacus instead of a calculator or DVDs when there is the NSFW Spankwire), and sales of iPads come in below guesses of 5MM at only ~4.19MM. AAPL had earnings of $4.64 per share vs. guesses of $4.08 per share but margins and iPad expectations were enough to send it, and the market down on the day.
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The other big tech Q was from IBM where a 7% drop in service contracts served shareholders up with a shit sandwich, despite the company beating analyst guesses on both the top and bottom lines as well as raising full year guidance to above those same analysts’ guesses. Hmmmmm. The company is now trading at ~12.5 this year’s guidance but has been on a hockey stick type run so Money McBags guesses a sell off was due on anything that was just a Khagendra Thapa Magar stiffy below absolutely positive, so it is what it is and now the sell side has a reason to print reports to get more trades. Money McBags loves that S&P Equity Research downgraded IBM to “buy” from “strong buy” because the difference between those is completely non-sensical. Either you buy something, or you don’t. Fucktards.
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Also, as mentioned earlier GS announced their Q and beat analyst guesses (wink, wink) on stronger than guessed trading results (unless you were guessing at them last year when they were ~60% higher than they were in this Q). As a result of their spanktastic relative Q (but their shitastic absolute Q), employees on average are now only going to earn ~$370k for the year which means instead of being the super rich assholes in the room, they are now going to be the whiny super rich assholes in the room.
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Finally, BAC beat guesses of $.16 per share by earning $.27 per share, that is if one ignores their $10B goodwill impairment charge, and really what’s another $10B among shareholders, especially as it is non-cash? And KO put up a nice quarter and beat guesses all around with a surprising 2% jump in North American sales with continued strong international growth. Money McBags has said it here before, but he owns KO and this is the kind of company you can almost feel ok gambling on because when everything goes down the drain like Money McBags’ hopes and dreams, people are still going to drink the fuck out of some Coke, On top of that, strong aspirational brands that sell a cheap product should continue to do well in emerging markets because those populations strive to adopt American culture and dream of the day when they too can sit on their fat asses all day and spend money they don’t have on things they don’t need while blaming the government for their problems.
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In small cap news, for some reason Money McBags dropped ~2k words on JOEZ last night which not only makes him the Charles Dickens of jeggings, but was also the biggest waste of his time since he tried to fucking find barley in a grocery store (and here’s a hint, just ask). One stock to keep an eye on (and just one eye, because you’ll need the other one to watch this) is SPU because it is doing what Money McBags believes technicians would call “going up.”
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Look, Money McBags dove in to this company briefly a few months ago as it tripped his screens as being cheap, growing strongly, and having a good balance sheet and on paper it looked almost as good as Kelly Brook. That said, he never wrote it up on the award winning When Genius Prevailed because it had one huge problem, and that was that their business involves selling fruit juice and concentrate in China which is further outside of Money McBags circle of confidence than nuclear physics (because he does understand some fission and fusion and heavy elements). So this is one of those times where Money McBags is just going to tip you off about a stock that looked hella interesting, seems fundamentally sound, and is moving, but that he just can’t confirm anything about, so do with it as you please.
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Money McBags will hopefully have more detailed stock analysis tomorrow as on his to do list is WGO’s Q, analysis of OPEN (which if the market turns should drop faster than Andrew Johnson’s support in the Republican party after 1865), and Leticia Cline.
9/23/10 Midevening Report: Housing and employment continue to struggle, but at least we have our healthcare
Sep 23rd
Ho fucking hum. Another day with more of the same news including bad unemployment numbers, bad housing data, and likely bad promises of a still unreleased Karissa Shannon sex tape (and it’s not even the one Money McBags wants to see). Excuse me while Money McBags yawns as how is he supposed to write dick jokes if the same shit keeps happening over and over again? Really, how many times can he write about new claims for unemployment coming in worse than analyst guesses (465k vs. guesses of 450k) and being revised upwards from last week (450k up to now 453k) in the “hold the shock and hope for no awe” strategy? It is beginning to get more redundant than a stutterer singing the beginning of the Beatles’ Revolution 9 so perhaps Money McBags should just get a NSFW room in Rome and come back during earnings season.
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Look, the unemployment situation in the US remains more fucked than Ashton Kutcher (which for him might not be a bad thing) or the the plot of an M. Night Shyamalan movie (and seriously, with the economy as shitty as it is, who the fuck keeps funding that guy’s movies? Did someone exhume Helen Keller and make her a studio head because only someone who is deaf, blind, and dead, would ever green light that kind of drivel. And yet Money McBags is giving away fresh new material for free on a daily basis, as somewhere an angel loses its wings) despite whatever phony number the (No) Labor Department puts out for new claims only to revise upwards next week. There are roughly 10MM people receiving some kind of unemployment benefits and the lack of jobs and income is causing the housing market to continue to at best scrape along the bottom like Traci Lords’ legitimate acting career. Don’t let the headlines fool you though as they read that existing home sales were inline with guesses and up almost 8% from last month but 8% up from last month still makes August THE SECOND WORST MONTH in the last ten years for home sales so the market trading up, or flat, on this number for most of the day was like Magic Johnson being excited about learning that he didn’t have herpes.
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In other macro news, the index of leading economic indicators was up .3% or as we say in English, flat (since the confidence interval on any of those indexes is +/- 1 trillion % or simply, not confident) and Warren Buffett told the NBER to talk to his old shriveled brill cream smelling hand by saying we’re still in a recession (which explains why last week he ruled out a double-dip recession because of course we are still dipping).
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Internationally the markets were down big as a drop in Europe’s PMI gave international investors PMS (and yes, Money McBags wrote that joke as it was too fucking stupid not to write, so indulge him a bit, ok?). Particularly worrying is that the figures showed German output slowed to an 8 month low which is bad for both Europe and connoisseurs of scat films everywhere. Also Ireland’s GDP contracted by 1.2% when analysts guessed it would rise by .5% which means Erin Go Bragh may be more like Erin Go Bust (though if Erin is going for Glenda Gilson‘s bust, then that is ok). Anyway, the news sent Ireland’s bonds plummeting while raising the countries risk premium to somewhere between Greece and Mel Gibson’s career.
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Finally, as a result of Japan detaining a Chinese fishing trawler captain, China is blocking exports to Japan of rare-earth elements which include scandium, yttrium (which doubles as a Wheel of Fortune contestant’s worst nightmare), thulium (with its delightful atomic number of 69), and Chuck Norris’ tears (because we all know Chuck Norris has never cried which makes his tears the rarest of rare Earth elements). These elements are critical in producing products such as hybrid cars, wind turbines, and Hello Kitty paraphernalia, so Japan’s economy could be a bit more fucked.
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In the market, Red Hat was up ~10% after growing revenue by 20% and earning $.19 per share in the Q ($.01 better than analyst guesses) thanks to strength in European markets and MSFT software sucking dick (to use a technical term). Also Rite-Aid was wrong-aid (don’t forget to tip your writer) for investors as it fell ~13% after reporting a bigger than guessed at loss due to lagging pharmacy sales as a result a weak flu season and drop in the popularity of Purple Drank now that Jamarcus Russell no longer has a guaranteed contract.
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In small cap stocks, ZAGG and EBIX continue to rally and Money McBags likes those stocks as much as Japan likes Paris Hilton so it is what it is for now but Money McBags sticks by his analysis that ZAGG has a worse long-term outlook than Michael Douglas’ throat (too soon still?) and EBIX is simply less analyzable than dark matter, so he is happy not to be long either (though the EBIX straddle should be paying off).
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Finally, HSTM which Money McBags mentioned yesterday as a name that he was going to look in to in more detail traded >100k shares for the second day in a row which is very unusual volume for that stock. Money McBags spent some more time on the name this morning and should have detailed questions for management next week but at first glance it seems like a potential nice long-term steady performer with their new SaaS model, market share lead in certain segments, and growing number of courses delivered through their already installed “pipe” in to hospitals. So while Money McBags needs to understand the backstory a bit more (and he hopes it is as appealing as this back story) as well as the competition and HSTM’s competitive advantage, the company has passed his initial sniff test so he will continue to dig deeper.
9/16/10 Midevening Report: Americans flash foodstamps in Poverty Gone Wild!
Sep 16th
The market was remarkably flat today despite a flurry of economic news including new claims for unemployment, the producer price index, census data on poverty, and Craigslist officially shutting down its section for sex ads (thereby forcing wealthy scumbags to seek other arrangements). The most important, and frankly confusing, of the economic reports was the (No) Labor Department’s new claims for unemployment figures which showed a decline from last week to 450k and an upward increase of last week’s 451k to only 453k. Money McBags was willing to bet two shares of NTZ that the upward revision would be to at least 470k so it’s a good thing he didn’t make that bet because then he would have been out ~$7 (though as NTZ is going to $0, he’ll eventually be out that money anyway).
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As we all learned here last week, Karissa Shannon is hot (even with her so early 2000s tramp stamp). But as we also learned last week, the government estimated last week’s new claims for unemployment number for 10 of the 50 states (not including the states of confusion, despair, or utter bliss) when those states didn’t send in their numbers due to the Labor Day holiday. Since government number crunchers are likely as good at realistically estimating data as economists, sell side analysts, and lobotomized dik-diks (which is very very badly), Money McBags was certain their estimates would have been further off than General Custer’s estimate of the number of Native Americans at Little Big Horn or Time Warner’s estimates as to the value of AOL. So new claims coming in at only 450k this week (though they will be revised upwards next week) and last week’s number being revised up only 2k is shocking, and Money McBags can’t believe it didn’t rally the market. Afterall, the 450k was 9k below analyst guesses and if one doesn’t care about absolute numbers, it was a slight positive.
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In other macro news, PPI was up slightly more than forecast thanks to an unusual spike in the demand for water sports videos (that pun may take a second or two) as producer prices rose .4%. The rise is well below inflationary targets and when one strips out food and energy costs (because why include things which people actually buy?), core PPI was only .1% vs. .3% analyst guesses. Some economists worry that the uptick being so small could signal deflationary pressures starting to mount while other economists believe that the small uptick signals deflation will be averted, so as always, economics proves to be .0001% science and 99.9999% making shit up. In the final bit of macro news, the Philly Fed announced that manufacturing in the region contracted, likely the result of rabid Eagles fans burning down manufacturing facilities after Kevin Kolb threw his first incomplete pass. The Philly Fed’s index came in at -.7 while analysts had expected it to come in at 2, but to be fair, those were economists making the guesses so the fact that they could even guess a non-imaginary number (like boogerteen) should be applauded.
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One more interesting note on the current state of the US Economy is that according to the census bureau, the poverty rate rose last year to 14.3% which is the highest since 1994 and the second statistically significant (gaussian bell curve be damned) rise in the rate in 5 years. And that number may even be understated as according to the Census bureau the weighted average poverty threshold, to be known from here on out as the “Americans Need Aid Line,” or more familiarly, ANAL, was actually lower in 2009 than in 2008 because the “average annual CPI-U for 2009 was lower than the average annual CPI-U for 2008,” and Money McBags believes in the accuracy of anything called a CPI-U as much as he believes in aliens, supply side economics, and feelings. 43.6MM people are now so impoverished that they have to look up to see the seemingly unattainable and yet oh so aspirational ANAL (as opposed to Alexis Texas who usually just needs to look backwards to see the anal) and thus one in seven Americans earn as much in a year as the great robber barons of the day like the inconceivable Lloyd Blankfein and the likely incontinent John Paulson scrape off of their well whitened teeth after a light mid-morning snack of caviar and unicorn fetuses (or is it feti?). But hey, we’ll always have the housing bubble.
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Internationally, Treasury Administrative Assistant Timothy Geithner is getting all up in China’s tea cup again about their policy of artificially keeping the yuan too low against the dollar. Geithner is threatening to label China as a “currency manipulator” in the next foreign-exchange report and if that doesn’t work, rumors are he’ll try to hit them with his purse. When told that they may be labeled “currency manipulators,” the Chinese government simply responded “I know you are but what am I” before yelling “no backsies” and slamming the door shut. Finally, UK retail sales unexpectedly dropped by .5% as people grow concerned about job security, tax increases, and the dye that goes in to black jeans potentially being hazardous to their health.
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As for stocks, F drove away from the market after Barclay’s upgraded them to “outperform” and raised their price target to $16 based on operational improvements and US consumers’ love of shitty cars. Also Fed Ex failed to deliver and traded off by 4% despite profit doubling and sales rising 18% as they missed analyst guesses by $.01 and guidance for Q2 was also $.01 below guesses.
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In small cap news, KIRK competitor PIR put up a very nice Q with 11% comp store sales growth (though off of a very easy 7.6% decline last year), gross profit expansion from 28.5% to 36.9%, and cash increasing to $186MM. The company also decreased clearance activity and reduced vendor and supply chain costs which is almost exactly the opposite of what KIRK did, so well done PIR, and once more with feeling, fuck you KIRK. KIRK will always be the poorman‘s (or woman‘s) PIR and while they are not exact competitors as PIR sells furniture and shit while KIRK just sells shit, there is enough overlap to cause one to scratch one’s head and wonder why KIRK was unable to execute as well as PIR. There is obviously a reason why KIRK trades at a discount to PIR, and KIRK was coming off of tougher comps, but management tone’s could not have been more different so if KIRK did not have a ~30% cash cushion and a ridiculously low multiple (thus bad news already being priced in to the stock), Money McBags would be staying further away from KIRK than Jets players now have to stay away from Ines Sainz (who is welcome to visit the award winning When Genius Prevailed’s lockerroom any time). While it is disappointing to see such contrasting quarters, and it may make KIRK more of a show me story than a Heidi Montag sex tape (because, please, please show Money McBags that story), Money McBags is fine with waiting on the name for another quarter to see if they can once again deliver (and remember, KIRK only missed guesses by $.01 while PIR only beat guesses by $.01, but like a small Georgia town, it’s all relative).
9/9/10 Midevening Report: Government massages new claims for unemployment data and gives the market a happy ending
Sep 9th
The market was up again today as it continues to rejoice that there are only “widespread signs of deceleration” and not whatever is worse than widespread, like “doublewidespread” or “assawful.” The big macro news was that new claims for unemployment were out and they demolished analyst guesses of 470k by coming in at a petite 451k. So hoo-fucking-ray that only 450k-ish more people lost their jobs (that is until it is revised upwards next week in the continued “hold the shock and hope for no awe” strategy that Money McBags has been talking about here for months and on which zerohedge finally picked up. And of course right on schedule, last week’s number was revised up from 472k to 478k, so party on).
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But the greatest part about the spanktacular jobs number of this week was that 9 STATES DIDN’T EVEN REPORT RESULTS according to Bloomberg, though that information is not in the actual (No) Labor Department release, because why would the government want everyone to know the numbers are more fictitious than AIG’s financial statements or Chelsea Handler‘s age (if that is what 35 looks like, then Betty White must be going on 50)? You see, it was Labor Day and even government lackeys get to take a day off every now and then to soak their withered fingers and catch up on episodes of the Jerry Springer Show after working so hard from 9 to 5 (not including the hour for lunch) for five days a week and as a result, 9 states simply gave the (No) Labor Department the Heisman (though not Reggie Bush’s, because he may already have given it back).
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According to Bloomberg, California and Virginia came up with their own numbers while the government estimated the numbers of the other 7 states who were no doubt too busy putting all of their white clothes in storage to even come up with an out of their asses guess (and if their asses look like this, guess away). So look, it is possible that in the week when ~20% of the states didn’t report numbers (though well over 20% population-wise thanks to California with their sunny beaches, warm climate, and population of bunnies) that numbers would fall by 28k to below even the lowest of analyst guesses (which was 460k), it is possible that the government was able to accurately guess at actual new claims numbers for states that didn’t report (since the government is known for their tip top and cutting edge analysis), and it is also possible that monkeys are currently flying out of Money McBags ass as he hums a Johnny Cash tune and dances the kazachok, because really, after seeing the success of Lady Gaga, anything is truly possible. That said, any or all of the above are unlikelier than Mike Tyson ever smoking weed with Tupac (because had that happened, the world may have ended out of awesomeness) so Money McBags is willing to bet a share of NTZ (which is falling ever closer to $0) that next week the numbers are revised a fuckload upwards and yet the market won’t care. Manipulate on my friends, manipulate on. If only the government could convince all 50 states to not report their new claims for unemployment numbers next week and thus guess at the numbers themselves, the recession would be over much sooner. Perhaps that is a strategy the administration should roll out next month when the non-stimulus fails to stimulate.
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In other macro news, the US trade deficit dropped by 14% which was the most in almost 1.5 years and driven by both an increase in exports and a decrease in imports thanks to strong pre-orders for the Kendra Wilkinson sex tape. More importantly, the US trade deficit with China also narrowly shrunk but there is no truth to the rumor that it was driven by tainted shipments of Coca-Cola from China which were found to contain inordinate amounts of a substance being referred to as “pee pee.”
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Internationally, Britain is keeping their rates flat as their Monetary Policy Committee left the official bank rate at 0.5% saying they’d make it zero, but then their economic system would be a total farce so at least this way it looks like they can still do something. In other British news, Kate Beckinsale is hot, while in even more British news, Britain fined GS $27MM for failing to disclose the S.E.C.’s investigation in to GS’s shady Abacus deal. While the fine is merely for show as $27MM is more inconsequential to GS than proper grammar is for a rapper or a US vice-presidential candidate (though coincidentally it is exactly how much Lloyd Blankfein shits out in a day after his breakfast of gold plated dodo bird eggs and jewel encrusted leprechaun nipples), it does once again point out what a bunch of asshats GS’ management team are.
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In stock news, AAPL was up thanks to lowering the restrictions they have for App approvals which means the world of porn just grew a little bigger and for that, we should all thank Steve Jobs. MCD was down 2%+ today after their monthly same stores sales came in below analyst guesses, yet they were still very strong. Overall same store sales were up 4.9%, 4.6% in the US, 2.2% in Europe, 5.6% in Paris Hilton‘s vagina where she apparently has enough room to operate more than just a McDonalds, and 7.8% in the rest of the world. The stock has certainly had a run but Money McBags continues to think that brands like MCD and KO should be longterm holdings as the world becomes poorer and developing nations become more westernized.
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In small cap news KITD jumped up today, likely on news of two small acquisitions, a sort of competitor of theirs getting funding, and it looking so fucking ridiculously cheap that not even Kelsey Grammar would date it. The acquisitions are of a company called Accela Communication based in Massachusetts and the assets of Megahertz Broadcast Systems based in the UK (so kudos for KITD for buying a company for whose employees they won’t have to provide dental insurance). For these two entities, KITD is paying $7.4MM (~$4.5MM in cash) and acquiring ~$8.2MM of run rate revenues but thinks they will be able to expand that as they sell their software and platform to the acquired companies’ customers. As Head of Americas Lou Schwartz said: “Our acquisition of Accela, while relatively small, is highly synergistic” and with Accela serving more than 150 corporate customers, that opens up more cross sell opportunity for KITD. More importantly though, KITD appears to be working hard as likely Member of the Tribe Lou Schwartz should have been at home for the High Holidays instead of showing up in press releases. So in theory, KITD should now be at ~$108MM in revenues for next year with no growth (and no growth for KITD in 2011 is as likely as Bill Gates moving to Fort Gay).
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Money McBags has written about KITD ad nauseum but as long as they focus, continue to execute, and stop dicking around with internet bloggers, they should outperform and help all of us shareholders support our local college students. And Money McBags promises his analysis of DFZ’s Q will be out in the next 24 hours. Unfortunately time does not grow on trees, but since time is relative, somewhere in the Universe the DFZ analysis has already won Money McBags Institutional Investor magazine’s analyst of the year award which fittingly is a golden cup completely full of shit.
