Posts tagged durable goods
Despite new claims for unemployment putting up the largest weekly increase since September 2005 (and you all remember September 2005, right? Alan Greenspan was still a genius, iPads were still just the truncated spelling of a sanitary napkin, and Kim Kardashian’s vagina was still underwraps (and some guy named Damon Thomas too)), despite Japan being downgraded by S&P due to greater risk of default than Charlie Sheen’s liver, and despite a little bit of happiness being squelched by studies showing breast implants are linked to a rare form of cancer (And no shit, really? You mean to tell Money McBags cutting open your tit and shoving something artificial in there might be a health risk? Shit, what’s next, finding out that eating Twinkies causes obesity or watching CNBC causes dementia?), the market continued to rally as investors buy the fucking rip.
The S&P flirted with 1,300 today in ways that would make the delightful Lisa Ann seem like a cocktease (and Ms. Ann, Money McBags can be reached at firstname.lastname@example.org should you ever want to tease anything of his) as it nudged above that psychological support level before closing a Robert Reich nut hair below it at 1299.54. Money McBags doesn’t know what to say anymore as the market races to the next bubble top (as opposed to the next muffin top), he just hopes you all are properly hedged and can get out before cookie crumbles.
That said, before Money McBags gets to the macro news, he has to go on a bit of a rant today because the Financial Crisis Inquiry Commission released their final report on the global clusterfuck (also known as the ponzeconomy™) and the report was strangely just one sentence: “Everyone acted like a bunch of asshats.” Ok, it was a bit longer than that (probably two sentences claiming that they were asshats and douchelickers) but Money McBags only read the highlights because he is waiting for the book on tape to come out.
The point is, and what really puts a turd in Money McBags’ punchbowl (or a copy of Pride and Prejudice in his bookcase if you will), is that in a letter to the FCIC, Fed Chariman Ben Bernanke admitted that the Fed just fucking missed the complete collapse of the financial system, no really, he did. But Money McBags guesses that all is forgiven because it’s not like that was their main job. Oh wait, what’s that? That is pretty much their only fucking job? Well fuck Money McBags but at least we fired all of the assholes who fucked up and said things in 2005 like: the economy “might bend but would likely not break” from a large home-price drop, and that the market may rest on “solid fundamentals,” and now say: ” it was hard for many FOMC participants, in the summer of 2005, to ascribe substantial conviction to the proposition that overvaluation in the housing market posed the major systemic risks that we now know it did.” Oh wait, what’s that? The fucking assclowns who said that are the same people who are still running the show? Are you kidding Money McBags? Holy shit. This is more fucking cockposterous than if Exxon rehired Captain Hazelwood and put him in charge of ship safety, neighbors insisted that Roman Polanksi take their RV and drive their babysitter home, or President Obama appointed Michael Jackson’s doctor as Surgeon General. Seriously.
Look congress/executive branch/Tina Wallman, Money McBags knows that you like to keep all of your chummy buddies at GS happy and he knows you just recycle the same shitty people through the same shitty jobs, but here is DOCUMENTED PROOF that these fuckers MISSED THE ONLY THING THEY HAD TO NOT MISS. Fucking A, you think Faye Reagan would keep getting hired if she always ducked and missed the money shot? Fuck no, because taking it on the chin IS HER JOB. So how the fuck can these guys still be in charge of this shit when they SUCK AT THEIR JOBS? They have already shown that they aren’t capable, so what makes you think they won’t fail again? Sucking at one’s job isn’t a random walk and sometimes past performance is an indicator of future success and the fact that we have LEARNED NOTHING FROM THIS DOWNTURN and are still sucking off the assholes who missed it, is so fucking ridonkulous that it makes Money McBags’ balls hurt just to think about it (which is why he spends his day thinking about this). Rant over.
Anyway, as for macro news, new claims for unemployment were up to 454k, a jump of 51k and the highest the number has been since October, right before QE2 created all of those jobs, oh wait, what’s that? QE2 wasn’t geared towards creating jobs? It was just supposed to pump up the markets so rich people could have their paper net worth artificially grow and cause them to buy maybe one more tennis bracelet from Tiffany’s for their “babysitter”? Well Money McBags guesses he was misled. Anyway, witch doctors blame the huge jump in new claims on snowstorms because when in doubt just blame an inanimate variable (and the jump was so large that it made Evel Kneivel roll over in his grave and it wasn’t even within a standard deviation of analyst guesses of 405k).
In other macro news pending home sales rose 2%, which beat analyst guesses of a 1% rise and is now only 5% below last year’s ass awful number. Meanwhile, bookings for durable goods increased bv .5% according to the Commerce Department, or fell by 2.5% if we take out transportation and anything else that might have made the number look shitty. Analysts guessed durable goods would rise 1.5% but in fairness to them, no one cares about this number anyway.
Internationally, S&P downgraded Japan from “super happy fun times” to “country and western karaoke night.” The ratings agency expressed concerns over Japan’s escalating debt (which is now twice GDP) and their inability to stop Godzilla after all of these years. In their report, S&P said Japan’s government lacks a “coherent strategy” to address the debt, before adding “for fucksake, they don’t even speak in English, so how are we supposed to understand any strategy of theirs?” That said, unlike the PIIGS, most of Japan’s debt is held domestically, so when the Pokemon hits the fan, they will implode rather than explode.
In the market, a shit ton of companies reported earnings led by NFLX who grew subscribers by 3.1MM and saw their stock price rise 15% which meant shorts like Whitney Tilson once again took it in the pooper (which of course makes NFLX a win-win stock for Mr. Tilson). Profits were up 52%, revenue was up 34%, and gullibility was up 900% as the plethora of free subscribers inflated numbers and caused gross margins to go down from 38% to 34.4%, but luckily for NFLX, that part of the press release was pixelated over. After the quarter, a number of analysts raised their target prices with Cannacord Genuity (formerly Cannacord Adams which, as always, is Canadian for “Roth Capital”) leading the way with a target price of $250, which is only about $1 Billionty too low.
In other news, 1985′s NFLX, MSFT, proved that you can be too big and fail as despite 5% revenue growth, their profit fell slightly as tablet sales started to eat in to sales of computers as if sales of computers were a cheesecake and tablets were Kirstie Alley. Elsewhere, QCOM shares jumped ~6% after the company put up a good Q and raised its outlook for the year citing the need for mobile phones to have more and better chips to be able to properly display HD porn while users are dropping logs at the office. Also, Motorola’s recently spun off mobility business announced their first Q today and dropped 12% on weak guidance, proving once and for all that you can’t polish a turd.
Finally, SBUX was flat despite a blow out Q as they announced that higher input prices will start to hurt margins and as a result gave guidance way below Street guesses. When reminded that Bernanke says there is no inflation, SBUX CEO Howard Schultz replied: “Are you talking about the guy who also missed the biggest economic downturn in our lifetime? Or are you talking about Scarlett Bernanke, who is causing my assets to inflate? Either way, they can both go fuck themselves because inflation is here, though if it is Scarlett, then I’d like a window seat for that.”
In small cap news, holy shit has it been a week for Money McBags and hopefully for you, his loyal readers as well. Last week he mentioned he was looking forward to earnings from KEYN, SMCI, and CRUS and all three crushed it in the last two days with KEYN up ~22%, SMCI up ~6%, and now CRUS up ~19% after they destroyed guidance. And then out of nowhere after hours today, TMRK agreed to sell for a 35%+ premium (and remember Money McBags has been pimping this stock since it was worth ~40% of what it is now). So boo-fucking-yah.
Before Money McBags breaks CRUS down today, he wanted to let you know that he did buy a tiny bit of NEI today despite their lackluster guidance for next Q. It’s a miniscule position because Money McBags knows he is really just guessing based on stock movement, increased volume, and long-term implications of their expanded manufacturing facility in Europe. For whatever it is worth, people more familiar with the industry than Money McBags (which would include everyone except for perhaps Carrie Prejean and a slice of bacon) keep telling him that they wouldn’t be expanding that facility unless they already had signed deals to increase production. In the low margin business they are in, one simply doesn’t put the cart before the horse so we should see ramping revenue. That said, guidance was for a 20% sequential revenue decline so either they need time to build out that facility, or the people Money McBags has been talking with about the industry are more full of shit than Kirk Douglas’ adult diaper. Money McBags thinks NEI has ~20% downside from here with the potential for 100% upside, so as a small speculative position, it is a risk worth taking.
As for CRUS, well they CRUShed it. The company grew revenue by 43% (though it was down 5% sequentially) and earned $.34 per share as their audio business which sells chips to AAPL was up 54%. They gave guidance for next Q for revenue to be $91MM ( up 65% y/y but down ~4% sequentially) with gross margins to maintain in the 55% range and operating costs to scale up a bit to ~$32MM or ~$29.5MM non-gaap. Taking their guidance, Money McBags gets to ~$1.30 eps for fiscal 2011 which is exactly where he was on them last Q. The question is, what the fuck does fiscal 2012 look like because revenue has now sequentially stabilized and they remain at the whims of AAPL. Unfortunately, their transcript hadn’t been posted anywhere by the end of the day and Money McBags refuses to listen to conference call as they are more of a time suck than NSFW Muff Guessing without any of the fun. Given that, Money McBags isn’t entirely sure how to forecast their next year.
If CRUS grows audio revenue 25% and energy drops 10% while operating costs grow 10%, they can earn ~$1.50 per share, so are trading ~15x that, which seems fairly reasonable. That said, if they grow their audio business 50% (and it will grow 70%+ this year) and their energy business is flat, they could earn $2 per share and thus are only trading at ~11x that which would be for ~37% growth. So look, Money McBags has no idea if either of those scenarios are reasonable, he is pulling them so far out of his ass that he thinks he actually pulled out some tongue as well, but it does show that there still might be some upside here.
Hopefully their transcript will be out tomorrow (because their earnings release had less color than a NSFW Betty White nude photo) and Money McBags will be able to find some information (and hopefully this will be out tomorrow and Money McBags will be able to find some gyration). When CRUS hit $18 several months ago, Money McBags told you to trim and with the run up today, he would be doing the same because for it to appreciate significantly from here, you have to believe the audio business can continue to grow at 30%+ and this cyclical company with one customer can trade at at least a market multiple, even though it may be at the top of the cycle. It is possible, so perhaps they gave some better info on the call.
Tomorrow, Money McBags hopes to break down NEI’s Q, CRUS’ transcript, TMRK’s sale, and everything that is going on in this picture. He also hopes to have a headline that doesn’t suck.
9/27/10 Midnight Report: M&A market remains hotter than Sasha Grey in Grand Theft Anal (though with slightly less hair pulling)
Money McBags is back after taking a mental health day on Friday because writing 1k-1.5k words a day of fresh material, analysis, and dick jokes about the market is not quite as easy as it sounds, especially as Money McBags takes his work very seriously (see, he could throw up just any picture of Odette Yustman, but instead he seeks perfection, and we all know perfection takes time, effort, and an unwavering spirit). But Money McBags is back tonight, so did he miss anything on Friday?
Oh yeah, the market jumped about a bazillion percent as US durable goods orders were up 2% (taking out transportation and whatever else needed to be taken out in order to make the number seem good, since overall orders fell by 1.3%, but darn you pesky transportation and your unfettered volatility), sentiment in Germany unexpectedly picked up despite Thursday’s Euro PMI showing output in Germany slowed to an 8 month low (so things are getting worse, yet people are feeling better, so schadenfreude must be ripping through Germany), and we had the first previews of the soon to be released Karissa Shannon sex tape*. So no wonder the market jumped as if it were trying out for a Jennifer Nicole Lee fitness video.
That said, the big news today is acquisitions, acquisitions, acquisitions as even the award winning When Genius Prevailed is starting to get offers (and those offers are from a Zemblan Prince who promises great riches for Money McBags and WGP if Money McBags will just lend him some money first to free his father, the rightful King to the throne). Southwest is swooping in to buy Airtran for $1.4B and a lifetime supply of those free drink cards. The takeover finally allows Southwest to move in to the Atlanta market and reach places that have been out of their range such as Mexico, which should be good for Atlanta gardeners everywhere.
In other acquisition news, Walmart made a $4.6MM offer to buy Massmart, in order to help bring WMT’s unique sense of style to South Africa. With WMT’s US sames store sales down for 5 consecutive quarters now, the company needs international expansion more than Segways apparently need instructions (though “hey dickbag, don’t drive this off a fucking cliff,” should be fairly obvious) or Jim Cramer needs an enema because that guy is completely full of shit. But this follows the trend which Money McBags has talked about here many times, and Money McBags isn’t talking about Rainbow Parties (though that is certainly a trend he would follow), rather he is talking about “investing in growth” dying out faster than the quagga in the 1870s or Lindsay Lohan‘s career.
Finally, Unilever is buying Alberto Culver for $3.7B to enhance their hair and skin care business as part of Unilever’s strategy to grow through bolt-ons and not transformational acquisitions. Alberto Culver is known for their hair conditioning products that are so good they can even give merkins that oh so natural shine and Unilever is hoping to to use Culver’s product to energize their emerging market growth where personal care products are taking off faster than Gabouray Sidibe‘s last blind date.
Internationally, Moody’s cut their debt rating on Ireland’s Anglo Irish Bank by three notches to Baa3 from BS, but as always, Money McBags cares about anything Moody’s has to say about as much as he cares about a Paul Krugman OpEd piece or anything on VH1.
In small cap news, NTZ, which Money McBags has mentioned several times here in the past as one of the dumbest yet cheapest companies around, had their earnings announcement today and finally answered the question: If a company has an earnings release and no one is around to read it, does it still trade down? And it appear that the answer is yes. Even though the earnings release was today, NTZ’s call isn’t until tomorrow as NTZ is an Italian company and thus they can only work an hour a day.
As for their results, they were pretty mediocre mixed in with a dash of yawn and a healthy side of ho hum (and Money McBags would love to hear this ho hum). Money McBags really wasn’t expecting much (like Michael Jackson’s wife in their bridal suite), and the company solidly followed through on those expectations. The good news is that topline grew by 8.7% while the bad news is that COGS grew slightly more than that by 9% as the company said they faced higher raw material prices (especially with leather) and higher transportation costs with an increase in freight fares. That said, operating earnings were positive for the 5th consecutive quarter, EBITDA grew slightly to 8.2MM Euro, and they didn’t go out of business. Other negatives include net earnings being negative as they had a 3.2MM Euro tax burden despite .5MM pre-tax Euros in earnings (as apparently Italy taxes off of gross income and whatever Uncle Vito feels like that day) and for the past 6 months their working capital has dropped by ~22MM Euro driving an ~7MM Euro cash burn. And this is one of the problems with this company which is that Money McBags trusts Italian company financials about as much as he trusts leprechauns or women with Adam’s apples. With Europe in the midst of austerity plans, who the fuck knows what NTZ is going to pay in taxes next year so there is enough uncertainty to keep investors more nervous than Lexington Steele’s girlfriend’s uterus.
So what do we do with this company other than point and laugh at anyone who owns it? It’s really unclear. In the first half of the year they have had 16.1MM euro of EBIDTA which using a 1.34 exchange rates translates to ~$21.5MM of EBITA so that puts them at a ~$43MM annual run rate and that doesn’t take in to account the fact that Q4 is usually their biggest Q (though Q3 is usually their smallest) and that Elisabetta Canalis is still fucking hot. The market cap is ~$201MM and their net debt is ~$64MM if you want to use that 1.34 exchange rate once again to translate it, so the company is still trading ~3.5x EV/EBITDA and remains cheaper than a sack of balls in the Castro on a Saturday night, but it is cheap for a reason.
Money McBags doesn’t imagine anything too interesting will come out of their call tomorrow and remains unclear what to do with this company. By most metrics the company is way too fucking cheap, but by common sense, the company should be more fucked than Paris Hilton‘s septum (or her vagina on yeast infection Sunday at the Viper Room) because they are still selling an expensive, completely discretionary consumer product to Europe in the midst of an unrivaled debt crisis. Money Mcbags sees no reason why this company should move up any time soon, but if they can just tread water long enough for the global economy to recover (which should definitely be sometime in the next 20 years, give or take 100), they should fly after that.
*Here is a very very NSFW preview (unless you work in your bedroom or as Larry Flynt’s bedpan changer) of the earlier referenced Karissa Shannon sex tape. Ordinarily, Money McBags does not like link to stuff this risque, but this is very important news and sometimes one must sacrifice their standards a bit for the good of the people and for the sake of the arts.
The market sold off today as it couldn’t keep ignoring the data and finally had to come to grips with where the bad macro news had touched it. The biggest negative was the Fed’s Beige Book report which failed to titillate the market like either Money McBags’ book report on the Kama Sutra (which he described as both thought provoking and delicious) or Fonzie’s little black book.
In Bernanke’s beige book we found out that economic activity has slowed in some areas and that Federal Reserve Bank President of Cleveland Sandra Painalto doesn’t let you get to second base on the first date (Newsflash Sandy: If you ever want to get out of Cleveland, you’re going to need to loosen up a bit, lower your reserve standards, and give Bennie B. some of that gold you’ve been hoarding). Eight of the twelve regions tracked by the Fed saw growth including New York, Richmond, and Andy Roddick’s pants (he is married to her, you know that right?), while Atlanta and Chicago saw a slowdown, and Cleveland and Kansas City held steady. The Fed cited high unemployment, an ailing housing market, and consumers being more fucked than Lisa Ann in I’m a MILFaholic as reasons for the slower than hoped for recovery.
In other macro news, durable goods orders fell by 1% in June while analysts had guessed they would rise by 1% which makes guesses just an absolute value sign away from being correct which is a fuckload better than usual. Orders for long lasting goods like machinery, metals, and herpes were down the most they have been in almost a year and a half. Even worse, non-defense aircraft orders tumbled 25.6% after falling 30.2% last month as airlines brace for the continuing growth of staycations and poverty.
Finally, mortgage applications fell 4.4% last week but were led by a 5.9% drop in refinancings as rates ticked up 10bps and anyone who still owns a non-foreclosed upon home has pretty much already refinanced it. Surprisingly new home purchase mortgage applications were up 2% but since the majority of those will likely be rejected, that 2% number is more fictitious than the easter bunny, santa claus, or male affectionate lesbians.
In stock news, RIMM jobbed it’s way up today despite the bad taste it has left in investors’ mouths as of late. Rumors are that the company will be launching a new operating system and potentially a new keypad before officially giving up to AAPL and thus becoming the second biggest thing to ever be defeated at Waterloo (fyi, RIMM’s headquarters are in Waterloo, Ontario).
Also, BA nosedived a bit after reporting a strong bottom line but a weak topline which was down 10% from last year. The company did reaffirm guidance which was slightly below analyst guesses but BA promised their new 787 would be more spacious and thus allow more opportunities for flyers to join the mile high club. And finally, Moody’s lowered their ratings on banks BAC, C, and WFC from stable to negative citing lessened government support for banks under new regulations and something about shitty track records which means those banks are going to eventually need that lessened government support. And if any company knows what a poorly run company who sucks at their jobs looks like, it is certainly Moody’s who never saw a huge market collapse it couldn’t misinterpret.
In small cap news, beta sold off as these stocks had run strongly over the past week or so as if they were trying to catch a glimpse of the delightful Melissa Archer and thus it’s not surprising that investors would want to take profits. CTGX reported last night and results were pretty much inline with Money McBags’ expectations. The company grew revenue 21% thanks to both strong staffing and health care services businesses. Health care services is now 27% of revenues and should start driving this business like Nipsey Russell drove all of the housevies crazy on the Hollywood game show circuit in the 1970s. In addition to a solid topline, SG&A was down 120bps, operating margins were up from 3.6% to 4.3%, and EPS went from $.09 to $.12.
The stock sold off on the day though due to the general market taking it in the yingus and lowered full year EPS guidance by CTGX due to a reduction in demand for solutions work from one of their large customers in their energy practice. Excuse me while Money McBags yawns on this one. Full year revenue guidance was increased to $320MM to $328MM from $314MM to $322MM (which is 18% growth) while eps guidance was reduced to $0.45 to $0.51 from $0.47 to $0.55 and although it is down, it is still a 26% increase from 2009. But the point is, Money McBags gives less of a shit about 2010 guidance than he does about Alan Greenspan’s thoughts on the housing, Nassim Taleb’s thoughts on lyrical prose, or Audrina Patridge‘s thoughts on anything other than which hole to enter.
As said frequently in this space, the coming electronic medical records implementations (and they are coming because the government has mandated them, not just because they ran in to Sonya Kraus in the hallway) are going to be huge for CTGX. As the CEO said in the press release: “We believe we are still in the early stages of the significant increases in demand expected for EMR assessments, systems implementation, and development work.”
This Q, EMR was 1/2 of their health care business which was ~$10MM in revenue and means they were working on 13-20 installations at ~$2MM-$3MM a project annually. But the thing is, only ~10% of hosptials have EMR and they are MANDATED by the fucking government to have them at least underway by 2014 so this business should scale faster than a business selling bronzer, or Valtrex, on the Jersey Shore.
Money McBags has gone through his valuation on CTGX here on When Genius Prevailed many times, so feel free to throw it in the search box, but this company is set for strong growth over the next few years so use this sell off as a potential buying opportunity. Obviously the lack of trading volume and the fact that CTGX’s boring staffing business is still ~70% of their revenues is a concern, but as long as EMR is on the way and this company isn’t full of shit about their ability to service that sector as aplombly as Bunny De La Cruz services the ding dong sector, the company should see solid growth.
The market tanked at the end of the session like Money McBags’ day which has caused today’s column to be late, short, and in need of one more read through, but it is what it is. You see, Money McBags was cranking away at his terminal, busily breaking down the news, perusing 10Ks for cheap stocks, and most importantly scouring the interweb for just the right picture of Kelly Brook, when life got in the way and he was called out to the cruel cruel world to fix some dumb shit. With dumb shit marginally fixed, Money McBags is drained of his energy and thus will be publishing his halfway done column today. It ain’t Shakespeare or Fante, but luckily it also isn’t Santelli, Colmes, or Bartiromo, and so it goes…
New claims for unemployment came out today and they were down 19k, or 15k, depending on if you want to use the number reported last week as your baseline or the “revised/manipulated” number released today. Last week new claims were 472k and this week claims were supposedly down 19k to 457k. Once again, if you do the math you get an equal sign more confused than Helen Keller’s dogs (because how the fuck would they know to sit, stay, or roll over when every command sounded like “arhgahgaha.”). Analysts guessed new claims would come in at 460k, so they were close enough that one might be deluded in to thinking their regression models actually regress to something believable and that this week’s close call was not just luck caused by a random fluctuation, but Money McBags knows better and knows that those models have no clothes (though he is usually in favor of clothes-less models). Either way, the job market remains more challenged than a bus driver in El Salvador or a color blind synesthiac. 4.55MM people remain on traditional unemployment, another 5.3MM remain on extended unemployment, and another 10MM remain on no employment and must subsist off the heat generated from their dying hopes and dreams. Luckily there was news out today that was portrayed as slightly positive with durable goods orders excluding transportation (and durable goods are anything expected to last for 3+ years like cars, machinery, and Savannah Stern‘s chest) rising by .9% after a .8% decrease in April bringing orders slightly above where they were in March. So in honor of tonight’s NBA Draft and the great Derrick Coleman, “whoop-de-dam-do.” Additionally, orders for non-defense capital goods excluding aircraft, rose by 2.1% which gives a bit of confidence to the markets that businesses will still be operating in a month.
Internationally, Greek default swaps reached record highs as common sense creeps back in to the market. Eventually Greece isn’t going to be able to roll over their debt so we can either make like math doesn’t exist and time doesn’t move linearly (Einstein’s relativity be damned) and live in a happy world where Greece can function in perpetuity despite a debt level so fuck awful that even Stephen Baldwin laughs at it, or we can just buy the fuck out of Greek CDS and get our fiddles ready so we can pull a Nero when Athens burns. In other international news, Australia elected their first female prime minister in Julia Gillard who was born in Wales, is a lawyer by trade, and though never married, dates a male hairdresser which I believe makes him a well trimmed beard. Gillard promises to work with mining companies and be tough on spending to keep Australia’s economy from going down under (eat your heart out on that one Jay Leno).
In earnings news, Nike just did it, well that is if “it” is missing analyst guesses of revenues. NKE profit was up 53% which was inline with guesses but revenues of $5.08B were up only 4% (ex. currency flucutations) and missed analyst guesses of $5.15B. Orders were up 9% though and the company did earn $1.04 per share so while the stock sold off ~4% today, it’s not like they totally shit the bed or perhaps more appropriately, it’s not like they shit on the cold floor in the corner of the room where 20 sweat shop workers sleep on the hour they have off in between shifts of sewing fucking swooshes on canvas sneakers. In other earnings news, Discover found their way to a strong quarter with profit up 14% thanks to improving credit trends, increased customer spend, and the House financial reform bill not having been passed yet. Charge-offs were up year over year to 8% from 7.5% but down sequentially from 8.5% so depending on what trend you want to use, card users are acting better or worse.
In small cap news today KIRK was down ~7% today and as Money McBags said yesterday, he thinks this is a good entry point (though not as good of an entry point as the gap in Jessica Hart’s teef). That said, Money McBags refuses to catch falling knives and this stock is clearly falling as investors take profits on shit that has gone up as the market now falls, so wait for this to settle before jumping in as fundamentally it remains as strong as Money McBags’ belief in truth, honesty, and Hayley Atwell.
The market tried to rally today like a drunken hobo lying in a pool of his own vomit reaching for the discarded fifth of whiskey by his side to try to taste one last drop. Unfortunately the last drop turned out to be another hobo’s urine as Money McBags hasn’t seen a rally less believable since John Edwards’ ended his presidential campaign. Yesterday’s reversal had given investors confidence that perhaps the market had reached a technical support level (until that technical support level fails again), while common sense should have told them that shit is still worse than Stephen Hawking’s time in the 40 yard dash. Helping the market today, other than cognitive dissonance, was the report on new home sales which showed sales climbed 15% in April, triple analyst guesses which makes it one of their most accurate guesses of the year. Of course sales were once again helped by government tax incentives and bedrooms being wallpapered with posters of Olivia Munn. Also helping sales was the median home price dropping 10% to $198k which is the lowest it has been since December 2003 and means people are not just losing money in the market but also in real estate. Finally orders for durable goods jumped 2.9% to their highest level since September 2008 but they fell by 1% excluding transportation and the 228% rise in bookings for aircraft. The number was less impressive than a George Will stand-up routine and does note bode well for continued economic recovery.
Internationally, European markets rose a bit even with the EU talking about taxing banks to pay for their future fuck ups. Money McBags applauds the move but wonders why the EU doesn’t just better regulate them or find a more efficient financial system. They are basically saying, “you can’t be trusted not to fuck shit up again, and even though we already require you to hold reserves because there is systematic risk in what you do, you do it so poorly that unsystematic risk is less diversifiable than the crowd at a Charlie Daniels Band concert, so we’re going to proactively make you pay for the shit you are inevitably going to fuck up.” So good for the EU. Also, noted economists are out saying Greece is going to either need a debt restructuring, is going to default, or is going to have to start charging for sodas. Economist Steve Hanke and Nobel Prize winning economist (which is a bit like being the world’s tallest midget or the Kardashian with the fewest STDs) Robert Mundell were both on record talking about Greece’s problems. Mundell, who was one of the leaders in the development of supply side economics and the creation of the Euro which gives him all of the credibility to speak about Europe’s debt situation as Mr. T, Professor John Frink, and my left nut said a Greek default may be “inevitable.” Now look, Money McBags hates to nitpick (unless the nit resides on Imogen Thomas‘ and he is doing the picking) especially as Money McBags treats the english language like Joan Crawford treated her kids as he splits his infinitives more frequently than a diarrhetic splits their butt cheeks, but how is it possible that something “may be inevitable?” By definition, the word inevitable mean “unable to be avoided.” So how the fuck can something maybe be avoided if one is unable to avoid it? Chicken meet egg, egg meet chicken, now go screw. It’s just not logically possible, like a funny Dane Cook stand up routine or an MC Esher designed house. Instead of saying it “may be inevitable” the great supply sider should have just said the debt restructuring is evitable which is the correct fucking word for what he was describing. Ugh. And yet someone listened to this dickbag enough to give him a prize other than a booby prize (though to be fair, Money McBags hopes to one day win a booby prize)? Anyway, Mundell thinks the Euro needs to be strengthened rather than put out to pasture like Nell Carter after Gimme a Break, while Mr. Hanke thinks that Greece is likely going to default and thus all of the Euro bailouts will have been for naught. Money McBags isn’t sure what to think other than that everything is currently more fucked than a rent boy in George Rekers’ european vacation suite.
In stock news, who cares, it’s all going down.
The market is up today as sales of new homes were up 27% blowing past analyst guesses and rising by the most in five decades which is so long ago that baby boomers were still in grade school, man had yet to reach the moon, and full muff was still in style (like the very very NSFW 1561). Sales were spurred by the government tax credit which runs out next week, milder weather, and improved construction techniques. Additionally, orders for US manufactured durable goods were strong excluding the drop in commercial aircraft (no pun intended). Taking out transportation (and if you are going to take out transportation, be sure to grease it up with plenty of oil at dinner if you want to make sure you get a proper ride later on), orders rose by the most since December 2007 when the sale of wrecking balls spiked during the “Make Detroit Beautiful” phase of the recession. Driving up orders for durable goods was business spend on computers and electronics as companies are either gearing up for the recovery or trying to get enough computing memory to store all of the videos they have been downloading from spankwire. And the SEC is back in the news today as Goldman is choosing to press their luck (no whammies, no whammies, and stop) rather than settle with them over fraud allegations and a report is out showing SEC regulators spent more time downloading porn than they did trying to actually, you know, regulate the fucking markets (though if they were doing it as a way to research whether Heather Vandeven was causing investors to drop their shorts and get longer, Money McBags totally understands).
Internationally, Greece is activating their bailout plan while Prime Minister George Papandreou called the economy a “sinking ship” and with the bailout he hopes to avoid the fate of the Dokos. The bailout will give Greece 30B euros from Eurozone countries, another 15B from the IMF, and free two for one coupons at their local Red Lobster. The Greek requested bailout is the biggest test for the Euro since it had to guess French Economic Minister Christine LaGarde‘s gender. With the premium on Greek 2 year bonds approaching the premiums on both Pakistani bonds and Lindsay Lohan‘s life insurance, Greece needed to finally cry “theios” and get the aid promised them. Of course getting the aid may be a lot harder than asking for it as German politicians are wavering on their desire to bailout Greece citing Greece’s manipulation of economic statistics, the language in the EU treaty which forbids bailouts, and the potential for any funds to help energize Nia Vardalos’s movie career (though we hear she is working on a new movie titled: My Big Fat Greek Debt Spreading).
In stock news AMZN beat forecasts but like other tech companies, guidance was a bit lacking. Revenue guidance for next Q was $6.1B to $6.7B and analysts guesses were more in the middle than lucky Pierre at $6.4B so the Street is worried they could miss. That said, AMZN earned $.66 per share which beat analyst guesses by $.05 thanks to a 46% increase in revenue as people still hate going outside to buy shit. It will be interesting to see how long it takes for the iPad to make the Kindle obsolete and thus put further strain on AMZN stock. Also, MSFT put up a nice Q as sales rose 6% and net income was up 35% thanks to Windows 7 and businesses starting to spend again. That said, the Street was hoping for better growth, especially after INTC’s numbers, and as a result MSFT is trading down off of a pretty stellar quarter for them. Money McBags hates everything about Microsoft from their clunky operating system which allows in more Trojan Horses than Troy and more viruses than Paris Hilton‘s vagina to that stupid fucking paper clip that pops up in word everytime one mis-hits one of those F keys, but the cycle should be good for them and they are relatively cheap at around 12x 2011 estimates. So Money McBags bought a little in this dip and is going to try to get a quick 10% before puking it out like a KFC Double Down.
In small cap news, RICK had a big day yesterday on no news. Two weeks ago they announced that March sales were up 11% with 3.5% same club sales growth and revenue for the Q up 21%. Of course it’s not RICK’s top line that we’re worried about as they have proven to be literally and figuratively extremely top heavy, it is their bottom line that needs work.
The market is down a bit today on news that some country in Europe named Portugal has had their debt rating lowered by a whole minus sign (yikes, imagine if it had been a minus sign and a frowny face) and slightly negative US macro news. New home sales came out today and boy were existing home sales surprised by that, though it does explain why their come-ons were never returned and why new homes have so many closets. Sales in february fell to a record low partially due to blizzards and partially due to people not having any fucking jobs. Puchases were down 2.2% and were projected to moderately increase, so once again, nice job economists, don’t let the assumed door hit you on the way out. In other macro news, US durable good orders rose by .5%, but less than expected by economists. However, exlcuding aircraft, military orders, and wrecking balls to demolish foreclosed upon houses, durable goods were down .6%. Once again the economy is putting out marginally good data followed by marginally bad data and thus remaining at more of a stand still than a value destruction debate between John Meriwether and Bernie Madoff. It’s good that we appear to be at a new equilibrium, though it’s bad that that equilibrium appears to be stagnant growth and no dessert after dinner.
In international news, Japan passed a $1T budget to stimulate growth while hoping to avoid fiscal hari kari as their debt is twice the size of their economy. As part of the legislation, the government is trying to create more jobs by building more pachinko centers (they are now required to have three on every block instead of just two), hiring Mr. Miyagi to help train youngsters on how to paint fences, and by requiring 10 “shooters” in all future bukakke films as opposed to the usual 5. In Europe, Portugal was downgraded by Fitch ratings from a country to I guess a principality. Their debt moved from AA to AA- and we all know how drastic that – is from Fitch ratings, in fact Money McBags has nightmares about getting a – from Fitch like he has nightmares about losing his Michelin Star or about waking up next to Lady Gaga with the Ellen Degeneres show blasting on his TV. So now we’re going from Greece to Portugal, with their tasty sweet bread, their delicious salt cod, and their lovely export Vanessa Marcil. Look, what Money McBags knows about Portugal can fit into an empty bottle of Taylor Fladgate or a small Portuguese hot plate, in fact, though he is a world traveler, Money McBags has never actually been to Portugal or it’s capital Lisbon (though he hopes to find it’s mythical sister city of Lesbian one day), but he does know that Fitch ratings are about as relevant as the Know-Nothing party, the steady state theory of the universe, or Robert Guillaume, so who cares.
Starbucks announced a $.10 cent dividend which will allow shareholders to finally have something to drop in to the tip jars when ordering their grande mocachino lattofcrape. Dick Bove is out today saying bank stocks may quadruple by 2012 due to reduced loan losses and new math (where quadruple means something at least four times less than it does now). Of course this is the same Dick who raised Lehman Brothers to a buy 3 weeks before their bankruptcy so either that was a glaring typo or nobody should give a fuck what Mr. Bove guesses. Also, MF Global is rallying on news that John Corzine, the former head of Goldman Sachs and New Jersey governor will be taking over as CEO. MF board members are hoping Corzine can bring the kind of profitability to MF Global that he brought to Trenton, Newark, and every other near bankrupt place in New Jersey. More importantly, his Goldman background will now assure MF of a government bail out should they ever experience another rogue trader.
In small cap news RICK continues to get hammered after hitting Money McBags’ $16 sell point several weeks ago. Unfortunately Money McBags did not not sell and for the first time in his life he is regretting a decision involving Rick’s Cabaret that didn’t center around leaving or not getting another dance. There was a lot of momentum in the stock and their quarter was pretty awful on top of a questionable acquisition, so the sell off is not unwarranted. Money McBags will likely lock in his gains and buy back later when the stock settles back down. Also, long time value trap IBKR was downgraded to underperform by Zack’s, though luckily for IBKR Slater and Screech still have them at Market Perform (while Money McBags has Kelly Kapowski at a Strong Buy). Their downgrade was based on lower options trading volumes in the next few quarters and the recent piss poor performance. IBKR’s CEO still maintains that the company has $2 of annual earnings power if you smooth out their performance over the long run (though that long run is looking like Eons as opposed to years) and the company is trading at 8x that. They get hit when volatility works against them as their hedges become more expensive when implied volatility is much different from actual volatility. Money McBags mentioned this name the other week and it is worth keeping an eye on, though it is worth keeping two eyes on Olivia Munn, so not sure where you’ll get the extra eye to follow IBKR.
And readers, if there are small names you would like Money McBags to look in to, let him know. He’s here for you, well for you and Riley Steele.
2/25/10 Midfternoon Report: Goldman Sachs seeks nobel prize for literature after (under)writing biggest Greek tragedy since Euripides
Greece’s debt issues are once again scaring the market like the snake ridden visage of the famous gorgon from ancient Greek mythology known more familiarly as Lady GaGa. Rising debt, a spiraling deficit, and a massive bidding up of CDS by traders betting against Greece has created somewhat of a Foucault current around the Greek islands which is now threatening to pull the entire EU and global economy in with it. Greece hasn’t been in such imminent trouble since the Battle of Thermopylae and they can only hope that the bankers whom they used for currency swaps did not run to the other side and push up the price of CDS with their inside knowledge of the obfuscated rising Greek debt and hence betray them like Ephialtes did in that same battle. Moodys is now threatening to downgrade Greece (perhaps to Jamaica, or maybe even Puerto Rico), so the global markets are very skittish today, since we all know how great Moodys is at predicting debt defaults (except when they happened to miss something called the entire global financial system meltdown). As if the Greek issue weren’t bad enough, the EU came out today (luckily their parents already knew) and forecast 2010 to be a year of fragile growth, even more fragile than the tears of a newborn unicorn upon learning it is just the figment of someone’s imagination.
In US macro news, orders for durable goods excluding transportation fell .6% which was below estimates of a 1% gain though they rose 3% when including the jump in aircraft orders. While durable good orders may have been down, non-durable goods orders or as their better known as, “shit made in China,” appear to still be doing very well. The new claims for unemployment number was also out today and it was much worse than expectations as it was up by 22k to 496k people filing first time claims. Luckily the labor department shrugged it off as being partially inflated by poor weather in the Northeast causing construction jobs to be cancelled over the past few weeks and also partially being inflated due to something else called employers laying a lot of fucking people off. They said without the weather, new claims would have been down by a “healthy” 10k to 440k jobs lost and if 440k job losses is considered healthy, then the labor department must think Michael Jackson has “just a little breathing problem.”
In stock news, CCE is up 33% on a takeout offer from KO, while KO is down 4% on that same news. KO’s CEO and Chairman said the move was a way to convert “passive capital into active capital” and when asked to clarify what exactly he meant by that, he simply said “Chewbacca was a wookie.” While Money McBags is an owner of KO, and thus 4% less happy today than he was yesterday, the global sales growth trends and brand equity have not changed at all by the deal and thus he is content to hold and potentially add a bit as soon as he can get a hold of some numbers on the deal. In other stocks reporting, SIRI somehow turned a profit this last quarter even if it was still less than $.01 per share. Subscriber growth in satellite radio has largely been stagnant due to the recession and the hundreds of other ways to get music for cheaper prices. With Howard Stern’s contract ending at the end of the year, Sirius may be more fucked than Houston during her 500 man gang bang. This company sells a product that is becoming outdated faster than the eight track or Jennifer Aniston (and take a few seconds on that pun, it will hit you in a bit, but e-mail me if you need help) as the prevelance of iPods, smart phones, and internet radio make paying a monthly fee for that same content as bad of a financial decision as the Olympics were for NBC or plastic surgery was for Greta Van Susteren. Money McBags would stay further away from SIRI stock than he would a hemophiliac AIDS patient in the throes of leprosy.
In small cap news PALM annouced their smartphones aren’t selling as well as they hoped as they have seemingly failed to put a dent in the duopoly that is the iPhone and the Blackberry (and honestly, taking on those two behemoths was about as smart of a move as introducing a soft drink to compete with Coke and Pepsi, a search engine to compete with Google and Yahoo!, or a cure for herpes to compete with Valtrex and staying 100 feet away from Paris Hilton). Palm also said their sales will be “well below” their forecasts like Vern Troyer is “well below” the clown’s hand to ride the roller coaster as apparently even a color blind lepidopterist is better at his/her job than Palm’s head of strategy is at his. Also Money McBags favorite WILC is up 10% today after a ridiculous and unwarranted sell-off over the past week. WILC remains the most ridiculous, cheapest name Money McBags has ever run across which is a bit worrisome because the last thing he thought was too good to be true was marriage, so buyer beware. And finally SMSI put up a decent Q and is up 14%. SMSI is a pretty interesting name in that they sell software that allows netbooks internet connectivity and net books continue to grow faster than a steroid user also suffering from pituitary gigantism. While the Board of Directors looks like they are waiting for the comet Hale-Bopp to hit the Earth, the company has done a decent job over the years of buying technologies in growing markets. SMSI is pretty much a one-trick pony right now with that one trick being connectivity and the pony having been purchased, but they are relatively cheap. Their wireless business grew 22% this year, though the pace slowed as the year wore on while overall topline growth was 9%. They guided to around 20% top line growth for 2009 and estimates are for them to earn in low $.70s per share which is about what they earned this year but their tax rate will be going up. The company has a nice balance sheet with $45MM of cash and no debt and is only trading at 12x estimates despite growing the topline 20%ish (again, profit growth may be negligible due to the tax rate increase). The issue with this company is that they have missed guidance before, have really only one product/area of focus, and rely on acquisitions to find the next new technology. While they have already wrapped up most of the big netbook producers as clients, competition is getting fiercer. So it’s not the best business model but it is moderately cheap with good prospects. The jump today is likely short covering but it is worth reading the transcript of the call and figuring out if a good entry point will exist once the short covering is over.
1/28/10 Midday Report: Global economy still more fragile than faberge egg wrapped in Donald Trump’s ego
The market is down again today thanks to Qualcomm giving a subdued forecast and something again about people not having jobs. Luckily, according to the Fed, the recession may be over which has left many of the 10% of unemployed people loudly cheering from their urine stained cardboard boxes. The Fed upgraded its economic outlook, reaffirmed it will end liquidity backstops and a $1.25T program to buy mortgage-backed securities, and then shook their magic wand over the grave of Benjamin Strong while singing an incantantion from the Atharva Veda. While they pledged to keep the benchmark rate low for an “extended period” (and remember by low they mean zero, and by zero they mean free money for banks), they did question how long inflation will remain “subdued” citing the fact that they just printed enough money to deplete the rain forest or for PacMan Jones to make it rain for six consecutive hours at his local Rick’s cabaret.
Despite the Fed’s modestly upbeat statement, weekly claims for unemployment came out today and while they were slightly better than last week (in the same way that Paris Hilton is only slightly dumber than a centipede), they were still worse than expectations as there were 470k new filers and expectations were for 450k. Additionally, durable goods orders were well below expectations growing .3% in December vs. expectations of 1.7% growth. This was driven by a 38% decline in orders for civilian aircraft, a 5% decline in orders for computers, and a 10% decline in things that “cost money.” However, if transportation is excluded, durable goods orders grew .9% which was above the .5% median estimate. So as always, you show me some data and I’ll make it look good or bad, depending on what you want to hear (she was fat, she had a good personality. Potato, puhtaato). Those analysts who have used Excel have a word for it, it’s called “solver.”
In international news, George Soros is now looking for a seat on the “China is a bubble” bandwagon joining Jim Chanos and everyone else looking at the market on a daily basis. I’m not saying China is moving too fast, but it shunned foreplay and offers of lube and then demanded to receive immediate insertion in to it’s Shanghai. Also Greece continues to worry economists but at least they are being honest about their problems as their finance minister, George Papanotgonnaworkhereanymore, has denied reaching out to other governments for help. Despite needing to raise an estimated 54B in euros, the finance minister said they can solve their budget crisis themselves and currently “have no plan B,” which puts him with Joseph Hazelwood, Tischman Speyer Properties, and John McCain.
As for earnings today, Ford posted a $2.7B profit for 2009 which was their first profit since 2005 and they now expect to also be profitable in 2010. When asked how he did it, Ford CEO Alan Mulally said “two words: vibrating seats.” NetFlix also put up a huge quarter earning $.59 per share vs. analyst estimates of $.49 per share. The company citied that 48% of users had watched streaming videos up from 41% in Q3 and 28% in Q4 2008 which should help deflate some business model concerns that people will stop using DVDs and shift to the on demand delivery model because NetFlix is showing it can also sucessfully provide movies on demand (unless you demand adult movies because NetFlix is prude).
In small cap news today CRUS is trading down heavily after they had their quarterly release which was exactly inline with their pre-announcement and included guidance above the street. Guidance was for next Q to have $55MM-$59MM in revenue, 54% to 56% gross margins, and $24MM-$26MM in operating costs with $1.5MM being non-gaap. Remember, this company is barely paying taxes right now so you can get to about $.11 of non-gaap earnings for next Q which is above the $.09 of the street. Now the stock could be trading down with AAPL being down since they provide an IC for audio in the iPhone and there could be concerns that the iPad will cannibalize iPhone sales and thus hurt CRUS’s revenue, but I have no idea if they are providing any ICs for the iPad so that is just conjecture for why they may be down today. Money McBags laid out his case for CRUS after their pre-announcement on 1/12/10 and said this: “Money McBags would hold off on buying today, but there is still probably $2-$4 of upside (15x FY 2011 $.60 estimates + $2ish in cash per share) and that is if the energy market does not have a big comeback. It is worth tuning into their 1/28/10 call to see what they have to say, so put this on your watch list and be ready to buy the dip.” So he is now going to listen to their call and may buy this dip (though he hasn’t yet so as always, do your own research).
In other small cap news, EBIX pre-annonuced that they had $10.3MM cash from operations in the Q, $19.3MM cash on the balance sheet, will be resuming buybacks, and are in fact a real business. The CEO, Robin Raina, also gave this statement: “In recent times, I have been asked about the decline in stock price and the rather high shorting numbers on our stock. As the CEO of Ebix and one of the largest stakeholders, I continue to believe in Ebix and the opportunity to make Ebix the largest insurance player globally. The Company continues to do well on all fronts and we expect Q4 results to be in line with our expectations. We have always believed in letting our numbers speak for themselves and towards that extent we will continue our efforts to create new benchmarks in terms of revenues, cash growth, earnings, and net margins for Ebix.” Money McBags has mentioned it here before, EBIX has a ridiculously good business from a numbers perspective, but there are concerns as to how real those numbers are given their predilection for firing auditors, complexity of business model and tax domiciles, and a CEO who thinks he is god’s greatest gift to the planet (when we all know that Hanna Hilton is god’s greatest gift, with duck confit and spankwire.com being a close second and third). The point is, this is either a ridiculously great buying opportunity for EBIX or you are just going to be giving your money away. As Money McBags can’t say which with any certainty, he is happy to sit on the sidelines as a spectator, though he’d be happier to be sitting on the sidelines as a spectator for the upcoming Brooklyn Decker photo shoot or the live reunion of the cast from the Facts of Life.
Yes Money McBags lights the menorah and it looks like the market wants him to get those table dances tonight as it is up again on positively mixed news. Durable goods orders rose, though missed expectations with weakness in autos and airplanes which is not suurprising since “Cash for Clunkers” went away like Tom DeLay’s dignity. Taking out transportation, durable goods demand demolished estimates like Kirstie Alley demolishes her Christmas ham (and it is reasons like this that NTRI has been absolutely killing it lately). Orders were up 2% ex-transportation, led by demand for machinery, metals, computers, and stripper poles. The question remains whether this is real demand or just inventory build back, so we’re trying to temper our excitement and make it last longer by just thinking about baseball.
In other positive market news today, initial jobless claims fell to their lowest level since September 2008 as eventually you run out of people to fire. So if you made it through and stayed employed this long, you might be ok, but if you’re looking for a job, you may be fucked worse than the lovely Houston at her 620 man gangbang.
In stock news, Money McBags’ long time favorite QCOR is up 20% on news that the FDA will give a ruling on Achtar for IS by June (and hopefully the ruling is more than just finding it delicious). Seeing as how it took QCOR about 3 years and several “do-overs” to get this filing accepted (and you’d think they were trying to prove P=NP with how long it took them to simply get a filing complete), this is positive news, but the FDA still has to approve this drug which is used by the majority of doctors anyway (so one would think it would be approved, but then again, one also thought Lindsay Lohan would have had a long and profitable career and Evolution would not have been contested in the 21st Century). Money McBags wouldn’t be buying into this rally though. It seems more like short covering than anything because the company is still going through growing pains and there is some uncertainty to their medicare reimbursement as they currently have to pay more than they get from medicare and didn’t reserve enough for late/non-payments last Q. The company is probably at a ~$.08-$.10 quarterly run rate right now, but they have cash and give back to shareholders through buybacks. They could have real upside if they continue to penetrate the MS market and can get on-label IS approval while overcoming the sticker shock from doctors/patients/insurance companies on the price of a vial of Achtar which currently runs at $23k a pop (and that is enough to cure spasms from MS/IS but create spasms from having to pay that price).