Posts tagged europe
Yeah, that’s right fuck Money McBags, what an asshole. He celebrates the one year anniversary of the award winning When Genius Prevailed by taking a Friday off for Thanksgiving (where he made sure he didn’t overeat) and then has not only dropped just one column so far in his first week back when clearly you, the hard working reader, deserve better, but also promised a new column today and yet is going to fail to deliver on that worse than Kenny Easterday fails to deliver a blow in an ass-kicking contest. So fuck Money McBags, plain and simple, after all, you don’t pay good money for this so you should be treated much better.
That said, Money McBags does profusely apologize to his loyal readers for the three seconds of their day it took to click over to the award winning When Genius Prevailed and not find new content because those three seconds could have been better spent screening for interesting new companies (like SAAS or BGS), storing gold for the upcoming hyperinflation, or wondering where Julieta Grajales has been all of our lives. Money McBags can assure you this isn’t a case of the “terrible twos” (as opposed to the delightful twos), but it is what it is and Money McBags only wishes his excuse today had something to do with preparing for a one on one interview with Lara Logan, telling phosphorous to fuck off, or simply going for the all-time high score in Cock Out, but alas, it was nothing so enjoyable.
You see, yesterday while driving home in rush hour traffic after taking care of some pressing business (though unfortunately the business was not Melissa Giraldo and the pressing did not involve her tongue on his sphincter), Money McBags was treated to his car deciding it no longer desired to have a working crank shaft, or Johnson rod, or fucking distributor to make sure the fucking spark plugs made the little gerbil in the car run faster. So unfortunately, Money McBags got stranded in fuck knows where and had to spend today trying to get that shit straightened out and thus was in front of a computer less than a Moody’s analyst was in front of a bubble bursting or Kathy Bates was in front of a mirror (because if she were to go in front of a mirror, she would no doubt turn to stone. Note to self: Get mirror, find Kathy Bates.).
That said, he has had about thirty minutes to breeze through the news and holy shit is the market rallying again as apparently Europe has fixed their financial problems in only 48 hours (which makes Money McBags wonder why if they can do that so quickly, they can’t figure out that soap isn’t just a lubricant), retail sales and home sales data weren’t just cocktacular, they were jizzlicioulsy cocktacular (according to the headlines, which of course are all that matter), and Goldman Sachs inconceivably lifted their view of the financial sector to “overweight” and really, when has the government, Money McBags means Goldman, ever been wrong?
The most interesting story to Money McBags was that retail sales knocked the fuck out of November with same store sales up 6% (of course margins are likely to go down more than Tori Black in Finger Licking Good 7, but those are just details) so you know what long-term unemployed people? No one fucking cares about you and your whining about my skill set is eroding this and I have no health insurance that, because if employment were at all relevant to the economy in this Keynesian driven world we live in where central bankers pray to the great ponzi in the sky, people wouldn’t be buying the fuck out of 88 inch HDTVs to be able to clearly see Megyn Kelly‘s hard hitting exposes where she tickles our taints with news about a bunch of assholes we don’t know, doing shit about which we don’t care.
Anyway, analysts were expecting a 2.6% increase, so they were only 50% off (which is also what sales were in most stores to push inventory out the door) and the best category was unsurprisingly discount stores which were up 7.2%. To drive the recockulousness of this home, the NY Times article on retail sales included this tidbit about a woman named Eve Dong: “She was plopped on a bench on the third floor of the Mall of America, surrounded by six bags and waiting for her friends to return. She had been there since 5 a.m., and had spent about $500 on items like clothes, skin care, makeup and shoes.” Money McBags really has nothing to add to that, he just wanted to point out the NY Times quoted a woman named Eve Dong (and he anxiously awaits them to follow up with Sarah Dicks, Alice Weiner, and Jane Hugecock).
Money McBags apologizes again for not having a real column today and for being way too fucking tired after three days of having to do shit to provide any real insight here. He promises he will be back tomorrow with a break down of the jobs report, perhaps a deep dive in to Caroline Trentini (that is if she is free and willing), and thoughts on European central banks and the US continuing to lend lend lend until Bernanke takes the T-Bills away.
The market was flattish for most of the day until the last hour as some of the fears about Europe abated in the morning thanks to their banking system remaining open for at least another three months (so long enough for depositors to carve out space in their mattresses and pull their funds before the next bank run). The big news is that european banks didn’t seek as much capital from the ECB as people feared they would with the ECB’s 442B Euro line about to expire like the late great Diaperman. Banks only needed an additional 131B Euro 3 month loan which was below the 210B Euro estimate and only 131B Euro above being healthy. In other international news, German unemployment was down for the 12th straight month as German workers have to put in overtime to make sure their Spanish counterparts can take their proper siestas. Ahhh, to be young and in the Euro.
In US macro news, private employers added 13k jobs in the US in June according to ADP which makes a huge dent in the 20MM unemployed/underemployed/already given up people in the US (and by huge dent, Money McBags means the opposite of that). Really, 13k out of 20MM is as significant as a null hypothesis with a p-value of 1 trillion or as likely to change the current atmosphere as a stink bug crawling in to Lady Gaga’s underwear changes her cuntosis. Analysts had guessed that 60k jobs would be added in June so they were only ~250% too high which for them is good enough to win Institutional Investor’s golden shovel as analysts of the year which can then be used clear out all the crap they have been spewing. One has to remember that analysts have confidence intervals wider than the divergent opinions on global warming or Taylor Rain’s rectum. The report should quell hopes of Friday’s Labor Department jobs number release being positive so the government may need to hire Melissa Archer to deliver the release in order to keep investors from paying attention to the actual numbers. In other US news, the FCIC is beginning their two day hearings on AIG and Goldman’s relationship to understand how those firms exacerbated the financial meltdown through their selling of derivatives and then how Goldman profited when AIG was bailed out as AIG used the bail out money to repay their mortgage partners of which Goldman was one (Goldman was repaid to the tune of $12B and Money McBags is told that tune is a mash up of Flight of the Bumblebees and Don’t Worry Be Happy). While Money McBags doesn’t believe anything will come from this inquiry, if it just puts the FCIC’s Heather Murren in the spotlight for a few minutes, he will at least be moderately titillated (and yes, that is Heather on the left).
In market news, S&P is cutting their ratings of Moody’s which is a bit like Jeffrey Skilling calling Dennis Kozlowski a fraud, Attila the Hun calling Ivan the Terrible a bit mean-spirited, or Lindsay Lohan calling Paris Hilton a whore. S&P cited that with new financial regulation investors now may be able to sue (and rightfully so Money McBags will vociferously add) rating agencies for sucking at their jobs (and as a reminder, their only job is to recognize when bad debt exists, and they missed the entire subprime/Alt-A fiasco like an anorexic misses dinner), there could be reduced demand for ratings if regulation removes the need for companies to be rated by nationally recognized organizations (here here), and Moody’s sucks at their job. It is only a matter of time before Moody’s lowers their ratings of S&P on the same concerns and we get a tit-for-tat ratings agency cock-off. In other news, Playboy announced a restructuring where they will become even thinner by eliminating low level workers but will keep senior executives to remain properly top heavy and Ford was rising after paying down $4B of debt and telling people they changed their name to Tesla.
In small cap news, ISLE continues to get shellacked and was doing so even when the market was slightly up today. Two day ago Money McBags told you all shorting ISLE would be a good trade and now you should be up 8% to 15% on it depending at what price you were able to short. A healthy company with a ton of debt doesn’t just dilute shareholders by ~23% unless bad shit is happening. That said, this was purely a trade so if you want to lock in your profits and go home, Money McBags would applaud that move like he applauds charitable donations, rags to riches stories, and rainbow parties. Also, old friend COOL has dropped below $.70 and remember Money McBags broke them down after their last Q and said the $1 they were trading at was much too high and he would be short if the stock were more liquid. Well if you were able to short it, congratulations but you might want to start covering because the easy money has been made. The point is, Money McBags has been hitting some good names for you all and providing you with enough dick jokes to make even Bob Saget shudder so tell a friend, tell an enemy, and follow WGP on twitter and facebook because the revolution has begun.
It was ugly out there today, real ugly, like a Lady Gaga- Alan Greenspan love child with a bad case of facial neurofibromatosis. Investors are worried that China is slowing down (they are), that Europe won’t be able to roll their debt (eventually they won’t), and that US consumer spend will shrivel up like Khagendra Thapa Magar‘s muchkin in a cold shower (it will). Leading the the market down was a sell off in China after the dynamically named research group The Conference Board (which apparently researches everything but how to market a business) said they had recalculated the leading economic index for China to show a 0.3% gain in April which is much lower than the 1.7% gain they reported two weeks ago and they blamed it on a calculation error (no really they did, but Money McBags doesn’t believe that for a second because aren’t asians supposed to be the good ones at math? Oh right, The Conference Board isn’t asian). Anyway, with the people calculating the economic data unable to actually calculate it properly, we are once again left guessing at what is really going on and all we have to go by is what we see and that is a lot of closed retail stores, packed job fairs, and blurry objects as our health care ran out and we can’t afford new glasses. As China is the engine that is fueling the global recovery (the lobster in the bisque, the plutonium in the flux capacitor, or the extra F in the MFF, if you will) any slow down in their economy will certainly put a damper on economic growth and thus reduce all of us to subsisting off of Ramen Noodles and our tears of despair. Also, with Spain having to roll over debt on Thursday, the same day the whole European banking sector will have their one year 442B Euro line of credit from the ECB expire, Europe is jitterier than Michael J. Fox going through the DTs. Thursday could be a momentous day in the market as Spanish banks are hinting that the ECB’s line of credit is crucial to their viability so we may see a financial crash so bad one would think Ted Kennedy were driving it over a bridge.
Unfortunately, US macro news wasn’t any better with consumers only confident that the economy sucks. The Conference Board (the research group who miscalculated China’s leading indicators, so take the following with a grain of salt, though if you’re feeling really adventurous, take it with several grains of salt firmly planted around the rim of a shot glass containing tequila) reported the US consumer confidence index fell to 52.9 from 62.7, a number which was also downwardly revised (likely due to a goal seek input error in Excel). Basically every metric measured by The Conference Board fell except for belief that things will get worse, belief that there will be fewer jobs, and belief that Keynesian economics is a farce. Not helping matters was that the Case-Shiller index posted only a .8% gain despite government tax credits still juicing the system like a Lance Armstrong steroid cocktail. Sure a gain is better than a loss, but the gain should have been higher even with 18 out of 20 cities showing increases. Of course with that tax credit now expiring, there is certain to be a pull back next month so large that it will make even Kenny Rogers shudder. If there were ever going to be a double dip recession, now is the time, so sit back and cross your fingers that the government will re-stimulate the economy and push the second dip off for another few years when you’ll be too old to care.
In stock news, shares of C were halted at one point today because the market couldn’t believe the company hasn’t hit zero yet. The stock traded down 17% thanks to what is being reported as a fat finger trading error (and again, we call that the Portia Di Rossi because someone who looks like this must have some hella fat fingers to keep the lovely Ms. Di Rossi satisfied) though it was likely just the run of the mill high frequency trading stock manipulation. New circuit breakers were put to work for the second day in a row and trading in C stock was shut down for five minutes until it had time to cool down and think about what it had done before re-opening down only 5%. In other news Barnes and Noble dropped 20% as with the advent of TV, the internet, and the NSFW spankwire.com people no longer read books. The CEO announced the company will be investing $140MM in to their digital book business and their digital book reader, the absurdly named NOOKie (and if Money McBags were running BKS the first thing he would do would be to change the name of the NOOK to something more catchy like “iPhone” or more honest like the “not going to be around for long” since the market is going to be dominated by the Kindle and iPad). Anyway, 2011 guidance was for break even to a $.40 loss per share due to falling margins and investment, and as analysts had guessed the company would be profitable, shares sank faster than General McChrystal’s chance at winning a Medal of Honor this year. Finally Verizon was break even in a down market as they are rumored to be signing a deal with Apple and Tesla Motors (TSLA) shot up 40% on its first day of trading despite never earnings a profit, having $300MM of lifetime losses, not forecasting a profit until 2012, and having their business revolve around selling an electric car when we all know eletric cars only exist in the land of make believe where it rains gumdrops and every Friday is free blumpkin day at the local Rick’s Cabaret.
In small cap news everything was down except for ZAGG which Money McBags exhaustively broke down for all of you earlier today (so check it out, really). A name Money McBags told you about last week, KIRK, continues to get hammered but it is getting to the point where one may have to actually step in, put some gloves on, and catch the falling knife as it’s now at 8x Money McBags’ high end earnings estimates with ~20% of its market cap in cash. Also ISLE was down 6% after Money McBags said yesterday it would make a good short trade. Of course Money McBags isn’t bragging about that call because everything went down faster than a call girl working for tips only, so any short call from yesterday looks prescient. There may be a short term rally tomorrow but Money McBags is warier of this market than Thomas Hoenig is wary of keeping rates too low for too long, so he is staying on the sidelines for now.
And don’t forget WGP is on Facebook, even though it goes against everything in which Money McBags believes.
The market was only marginally down today despite terrible macro data and a Fed statement about as optimistic as Nouriel Roubini at a funeral (the funeral of course would be for the US economy). New home sales dropped 33% to a record low as once again, and for all of you keeping score at home, THE GOVERNMENT TAX CREDIT EXPIRED (caps and exasperation intentional). According to the New York Times, analysts guessed home sales would drop to 400k from April’s previously reported 504k, while according to CNBC, analysts guessed home sales would drop to 410k, and finally according to the WSJ analysts guessed home sales would drop to 430k, so no matter what news source you used, analyst guesses were still fuck awful and worse than Manute Bol’s skin. On average, analysts predicted a ~19% drop in new home sales but the number being reported is a drop to 300k, so analysts’ guesses of a 19% drop were off by ~25%. Wow. Money McBags wonders if their regression models suffer from colinearity, heteroskedasticty, or just stupid fucking dependent variables. To be that wrong about something and yet still be called professionals stretches the definition of the word “credibility” in ways that would make even Noah Webster’s dictionary flaccid. And as usual, making the numbers seem slightly better is that last month’s new home sales number was manipulated (Money Mcbags means readjusted) downward to 446k from 504k. So the drop being reported is 33%, or 446k to the all-time record low measurement of 300k when in actuality, the number fell 40% from 504k (which was the reported fucking number last month) to 300k. Readjusting the number downward before the awful report left 7% of “down” out of the reaction of investors who weren’t paying attention and instead were busy trying to figure out who they have to fuck to get a job at CNN (And now we finally have a delightful answer to that). Making matters worse is that the supply of homes on the market was up 47% leaving an 8.5 month inventory (though the denominator in that equation, which Money McBags believes is the current annualized sales rate, is creeping towards zero which means we are getting closer to an undefined supply of homes on the market at which point Money McBags believes they should all logically be free and thus homelessness in this country will cease to exist, so perhaps that is the admirable goal of all of this). The point is, home sales/employment/Heidi Montag were all manipulated up over the past few months by tax breaks, stimulus plans, and plastic surgeons, but now that that is over, they are starting to turn back down and that could be worse than eating a shit sandwich with extra E. coli.
In addition to the drop in new home sales, the Fed came out today with their statement from their June meeting which was about as uplifting as the Diary of Anne Frank or nut cancer. According to the statement:
1. Housing starts remain at a depressed level
2. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad
3. Bank lending has continued to contract in recent months
4. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit
5. Investment in nonresidential structures continues to be weak
6. Employers remain reluctant to add to payrolls
7. Hanna Hilton remains retired from porn
Honestly, all of that was taken verbatim from the Fed’s statement (well, except for maybe the last one, but they were all thiking it). The Fed’s statement paints a bleaker picture of the US economy than what Picasso would have done in his blue period. The Fed then went on to say the rates would stay between 0 bps and 25 bps for an extended period and at least we’re not fucking Greece, yet. Money McBags doesn’t see how anyone can get excited about the markets after reading that, but then again, he can’t understand how anyone can get excited over soccer, so what does he know? But as an aside, congrats to the US soccer team for beating a country with 1/10th of the population of the US on a last minute goal. Truly impressive. For their next feat, Money McBags hears the US soccer team will challenge Michael J. Fox to a game of Jenga.
In Europe, data was just as bleak as in the US although it was reported with one of those foreign accents so it sounded much more charming. The Eurozone PMI is having a bit of PMS as it cramped up and fell to 55.4 from 56.2 while Germany’s Ifo was stronger than expectations but future sentiment eroded and stunk like month old sauerkraut left out in hot sun.
In stock news, JBL rocketed up after beating estimates, announcing above the street guidance, and promising to body slam the competition as if the competition were the lovely Meredith Whitney. Also CarMax’s earnings took off and beat expectations thanks to selling cheap ass cars in an recessionary environment. The company earned $.44 per share, up from $.13 and easily beating analyst guesses of $.33 while growing revenue by 23%.
In small cap news, there isn’t a lot going on but Money McBags wanted to spend some time talking about KIRK today as it has been selling off and is now getting to be cheap enough that you all should consider adding it to your portfolios. KIRK basically sells cheap shitty trinkets that midwestern housewives love to put on their mantels, on their side tables, or over their walls to cover up the beer stains. In yiddish, they’re called tchotchkes and in english they’re called garbage. That said, the company has been selling a lot of this shit as people are staying home more often and not travelling and thus they are looking for cheap ways to spruce up their houses with a nice Elephant Mother/Baby statue, a Drama Queen plaque, or (and I am not making this up) book boxes to give the illusion that they have some of that fancy learning while keeping the practicality of having somewhere to store their spare teeth and can of wintergreen Skoal. The point is, the company sells goods that are perfect for a recession as they are inexpensive and can brighten up the place where people spend most of their time.
Not only should there be demand for their products, but management has done a fantastic job of turning this company around. Basically a few years ago a PE firm had taken over and the management team was smart enough to saddle themselves with expensive mall based real estate, add too many product skus, and try to bring their products up market and sell their customers gold plated mirrors when all they really wanted were some monogrammed candles and a fucking amber wall sconce or two. The point is, the management team had misread their customers, killed their margins through higher operating expenses, and basically performed worse than a John Meriwether investment vehicle. Of course this was all happening as the recession was starting so it made everything much worse, but luckily Carl Kirkland got fed up with the dumb shit and took over his company again and brought in a management team to turn things around. Since then they have cut the skus, pared expensive real estate (they are now ~75% off mall), and focused the strategy back on selling cheap tasteless crap, and that has worked phenomenally. The company’s revenue was flat in 2008 and grew in 2009 and last Q revenue was up 12% despite having 15 fewer stores (they now have ~280 stores). The plan is to open ~20 net new stores in the second half of the year and thus grow for the first time since the recession hit.
But here’s the best reason to like this company, it is fucking cheap. They earned $1.71 last year and estimates for this year are ~$1.60 due to an increasing tax rate. That said, top line guidance is for 5% to 8% growth with 3% increase in operating margins so if you take the best case scenario, the company could actually earn ~$1.85 to $1.90 for the year. The stock has sold off recently and is now ~$18 which is <10x best case scenario and ~11x analyst guesses but they have ~$3.50 cash per share on the balance sheet and no debt which makes this almost as attractive as Nicole Trunfio. At a minimum this company should have a 14x market type multiple and throwing that on analyst guesses (which could be low) yields a $22.50 price and if you add the $3.50 in cash to that and you get to ~$26 target price which is ~40% upside to today. Also, they had ~$52MM of EBITDA last year ($47MM op. income + $~$15MM depreciation) and have a current EV of ~$300MM so are trading at <6x forward EBITDA since EBITDA should grow with growing top line and slightly improving margins. The negatives are that margins have pretty much topped out, they now have to show they can profitably grow new stores, and like all retailers they need to keep their merchandise relevant. That said, the stock has traded off for no reason so it’s a good time to start a position (and if the position is a reverse eiffel tower, even better) because it’s cheap and they seem to have a solid grasp of their target market.
Readers, Money McBags apologizes for his absence yesterday, unfortunately he has a life outside of the great When Genius Prevailed and that life required him to spend all day watching Anna Paquin scenes now that she is oh so comfortable with her bisexuality, so you can’t really fault him for that. Anyway, today the market seems to be running like a lobotomized senior citizen with an advanced case of alzheimers as it forgets Europe is about to collapse under a pile of oversized debt, the US unemployment rate is stagnating like the rebuilding of the Twin Towers, and the great Hannah Hilton remains retired. That said, short term macro news is pushing the markets to new heights, levels it hasn’t seen since at least last Friday, so ring those bells because the economy is all of a sudden back (until tomorrow).
Driving the market up today was that the ECB raised their growth forecasts, China showed an increasing trade surplus, and clothes-less emperors are now becoming the rage (because despite today’s numbers, the economy still has no pants). The ECB said GDP growth for 2010 will now be 1% which is above the .8% they had repviously predicted and above the potential 0% on which most investors are betting. While they raised 2010 GDP forecasts, they lowered 2011 from 1.5% to 1.2% which means the absolute level of GDP at the end of 2011 is now expected to be lower than it previously was (since multiplying last year’s GDP by 1% and then 1.2% yields a lower number than multiplying it by the previous forecast of .8% and then 1.5%), but why let math get in the way of a market rally? Honestly, if logic, common sense, and facts mattered then the markets would be efficient and Burton Malkiel would be so celebrated that he would be applauded by young and old on his daily random walks. In other big news, China’s trade surplus rose in May giving investors hope that China can keep fueling an expanding global economy. Imports and exports both grew by ~50% in May driven largely by an increase in purchases of lead paint to go with an increase in sales of toys. With a $19.5B trade surplus for the month, the Chinese government should get loved for a long time at the Beijing Rick’s Cabaret but is getting even more pressure to let the renminbi float like Kelly Madison‘s renminbis in the deep end of the pool in her San Fernando Valley abode. Finally, Japan revised their GDP upwards from 4.9% to 5% as they forgot to include the new buttress they put up around Tokyo to defend Godzilla’s impending attack.
While international news seemed to be strong, US macro news was mixed at best, which has left Money McBags scratching his head over today’s rally (though it could also be the lice). The good news is that the budget deficit fell to $136B (and for those of you scoring at home $136B might be more than the price of all of the tea in China) thanks to higher tax receipts. Money McBags is not clear where the higher tax receipts came from as unemployment has remained the same so perhaps it is from people filing their quarterly capital gains taxes which should have been higher with the strong market rally which has now fallen faster and harder than Money McBags did for the lovely Amanda Seyfried. So we’ve got that going for us. In other US news, the trade deficit widened and housing foreclosures fell largely because banks have run out of repo men as bank repossesions reached a record high last month. While fewer foreclosures are good for the markets, the reason for it is as positive as saying fewer people walked out of the last Robin Williams movie (since of course fewer people attended). Finally, new claims for unemployment came out today and were worse than analyst guesses as claims fell by 3k to 456k. Making things more confusing was that last week’s new claims for unemployment were 453k so once again the (No) Labor Department has either confused the basic tenets of addition, lost some beads off of their abacus (no doubt purposely taken off to replace one of the office’s missing anal beads that likely got lodged in Hilda Solis’ shapely derriere during the department’s recently passed Memorial day picnic), or is just MAKING THE FUCKING NUMBERS UP. Last week Money McBags wrote how 460k -10k somehow = 453k and now the (No) Labor department is at it again by restating last week’s number from 453k to 459k, which is how this week we get 453k – 3k = 456k. So last week’s disappointing number was actually more disappointing than previously thought (which Money McBags predicted) which makes the new claims for unemployment numbers now less believable than Ellen Degeneres as a romantic lead (like in the ironically named Mr. Wrong, and of course what was wrong with Mr. was that he peed standing up). The market seems to think that continuing claims falling by 255k to 4.46MM is good news except for the fact that: 1. It’s not clear that the 255k drop wasn’t just people exhuasting their benefits, having been unemployed longer than the making of The Man Who Killed Don Quixote has been in production. and 2. 4.46MM people unemployed is still a fuckload of people. But hey, rally on my freinds, rally on.
In stock news, just about everything was up except for GS which has broken through their $135 support level on their way towards extinction. It will be interesting to see how aggressive the government goes after itself (I mean Goldman) because even Meagan Cheung could find fraud on their trading desks. Also, BP rose 6% after Jim Cramer finally said to sell which once again proves his ability to be negatively correlated with the markets. That said, Money McBags wouldn’t go near BP unless he were wearing an extra strength contamination suit and had a lifetime supply of Lamivudine.
In small cap news, KITD hit its first short squeeze and jumped 8%+ and Money McBags hopes this is the first of many while MLNK was up a bit after crapping all over itself with yesterday’s earnings announcement. Money McBags is short on time today but tomorrow he will break down MLNK’s shit awful Q where their EBITDA dropped in half, their cash flow barely broke even, and they continued to pawn it off on new business taking longer to start-up. Wow. You know what Money McBags calls it when your new business takes longer to develop? Deep doodoo, and yes that is a bit of a technical term.
6/4/10 Midafternoon Report: Jobs report challenges Marmaduke movie for biggest bomb released on Friday
The (No) Labor Department’s jobs report came out today and was well below analyst guesses which sent the market tumbling like Tony Hayward’s Q score at a Greenpeace convention. The US added 431k jobs in May which was the biggest increase in a single month in over a decade since the internet was founded and needed people to set up all of the tubes. While on the surface that number seems spanktastic (though not nearly as spanktastic as Rosie Huntington-Whiteley who Money McBags would let hunt his whitey anytime), the market was surprisingly not fooled by it. First of all, analysts had guessed 500k jobs would be created so the actual number came up shorter than a Kristen Bell skirt or Bernie Madoff’s alibi. But what makes matter worse is if one digs in to the numbers it is doubtful any real jobs were created despite the government claiming that a whopping 41k private sector jobs were created, and honestly, bragging about 41k private sector jobs being created is like bragging that you won the spelling bee on the short bus. But let’s look at the numbers more closely.
Of the 431k jobs created, 411k were temporary census workers and 31k were temporary service workers. So already were at a net -11k permanent job creation number unless the government decides to turn the US into Oceania and thus take a new census every month thereby making those temporary jobs permanent. Now the Labor Department said the government cut 20k permanent jobs so the 411k census jobs added led to a net 391k new government jobs. So since the top line number was 431K, they solve for x in 431k – x = 391k and get “you’re fucked,” I mean ~40k for private sector job growth. But here’s the thing, as we said above, 31k of those ~40k were temporary fucking jobs so even using the government’s hunky dory jobs created numbers, there were only ~10k PERMANENT private jobs added to the economy or 10k total permanent jobs lost including the government figures. That number is more piss awful than having to listen to Lynyrd Skynyrd put to music any of George Will’s essays about baseball. But wait, it gets even fucking worse, like being married for 21 years, or being for 21 years and then finding out your spouse was gay the whole time, and yes I mean you Fran Drescher (though to be fair, having to hear Fran Drescher every morning might turn Money McBags gay as well). You see the BLS uses something they call a birth death-model to estimate the lag between the creation of new businesses and the close of businesses that their survey misses in the short term. They don’t release the methodology so it is the biggest black box Money McBags has seen since Vanessa Del Rio graced the screen in the 1980s. For May, the BLS’ birth death model showed an increase of 215k jobs, which again is an estimate likely based on population levels, claims for unemployment, and shoving one’s thumb far up one’s own ass. So based on our previous numbers where we showed 10k permanent private sector jobs were created and 10k overall permanent jobs were lost, we can now deduct a number somewhere between 0 and 215k from that (and Money McBags believes the number is closer to 215k since the birth-death model is likely more fictitious than strippers who dance just to put themselves through college) to get the real job DESTRUCTION number which was likely more negative than a disgruntled anion. So we’ve got that going for us.
Other tidbits from the jobs report show that 6.8MM people have been out of work for more than 6 months, the average length of unemployment is now 34 weeks which is the longest period since the government started keeping track in 1948, and Chewbacca was a wookie. Some may spin the drop in the unemployment rate from 9.9% to 9.7% as positive but that was more likely caused by people leaving the workforce as the Labor Force Participation Rate, which oddly enough measures the labor force participation of working age adults, decreased to 65.0% from 65.2%. So no matter how the government spins the jobs number, it sucked harder than a young lady trying to fellate Whitezilla all by herself.
In international news, everything was down as the Euro broke through the critical $1.20 mark on its way to extinction. Traders now see $1.18 as the next short term technical downside target for the Euro until it falls below that. The latest fears coming out of Europe revolve around Hungary which is apparently starving for funding. The newly elected vice president of Hungary, Lajos Kosa, channeled his inner Joe Biden late yesterday by saying that Hungary is in a Greece-like sovereign credit crisis. In response Prime Minister Viktor Orban didn’t deny the issues but did call Kosa a dicknut for speaking out of turn and promised to punish him by uninviting him to the new administration’s meet and greet with Zita Gorog. The new government is now in the process of determining the real state of the budget, and will report this weekend on whether they are fucked or just lovingly violated. The fear of Hungary defaulting is causing a spike in european CDS and has caused the price of European default insurance to rise to it’s highest price since Jean-Paul Marat forgot to lock his bathroom door.
In stock news, everything is down as the government can’t even properly manipulate the economy anymore. MCD is showing weakness because they annonced they will have to recall 12MM Shrek drinking glasses that contain the toxic metal cadmium. The irony in this is that the cadmium glasses are still less toxic and better for you than the nine piece Chicken McNuggets. And WMT had their annual shareholders meeting today where they announced a five year plan to add 500k jobs, insitute a $15B stock buyback plan, and continue to make the world a worse place.
In small cap news, WGO took it in the winnebago again today since the stock remains more overvalued than multi-family dwellings in Detroit before the subprime crash. Money McBags has been through this before but the company is not going to make money this year and is trading at a valuation that makes less sense than the rules of cricket. This is a best a $7.50 stock and on high volatility days it will get pitched around like the SS Minnow because valuation is based solely on hope and hope doesn’t put food on the table (though Hope Dworaczyk could put her melons on Money McBags’ table any day). The fact is, every small cap closed down except for somehow CTGX, JOEZ, TZA, and TWM (and that last two are funny because they are leveraged small cap short ETFs) because no one wants to hold illiquid little shit when the economy is still struggling, Europe is going to 0, and we now have to give a fuck about some do-shit country called Hungary who dropped a steaming pile of ghoulash on the markets today.
Oh well, at least try to have a good weekend.
Stocks bounced around today like BP’s excuses for the Gulf oil spill or like Kelly Brook’s “oil domes” while she jumps on a trampoline. Solid US economic data pushed the market in to positive territory in the morning, giving investors a slight glimmer of hope before that hope was flushed away like a 3 story building in a Guatelamian sink hole or the Sears Tower in Paris Hilton‘s pants. Leading off the slew of economic reports was that manufacturing in the US grew at a faster pace than analysts guessed with the ISM index coming in at 59.7, a whopping .7 above expectations. The rounding error was driven by increased demand for exports which will clearly be short lived as the dollar strengthens against the Euro. That said, the ISM’s employment gauge climbed to its highest level since May 2004 when the subprime boom was still just a twinkle in Alan Greenspan’s eye. Factories did add 101k workers through the first four months of the year which is likely a huge relief for the 20MM americans still unemployed, and yes, that was sarcasm. Construction spend in the US also rose by 2.7% which was the most since April of 2000 but it was likely spurred by the ending of the first time home buyers tax credit so it is more likely an outlier (like the straight Wiggle) than a sign of real recovery.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore’s marriage as it drops towards $1.20. In other international developments, China’s manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China’s Purchasing Manager’s Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it’s too late, you hear that Bernanke? Finally, the Bank of Canada raised the country’s interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd’s cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs’ ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their “top kill” attempt to stop the oil leak failing worse than Gary Coleman’s liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word “clusterfuck” for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of “love seat” can be so nebulous). But here’s the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer’s dignity after emptying his “mini-bar” at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan‘s behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it’s trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn’t trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that “the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend,” this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan’s reputation, rich people are still going to spend on shit they don’t need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven’t owned it, but be ready to pounce if shit starts gettting better.
5/20/10 Midafternoon Report: S&P slides closer to next technical level of 0, most economists predict a bounce from there.
Fucking Europe. Seriously. First they tried to tax us without letting us represent ourselves and you know what, we don’t play that way. Then they got all upitty and burned down the White House while poor little James Madison sat on his gelding and got his S’mores on. And after that we’ve had to bail them out of losing a fucking war to the worst human ever (and Money McBags does not mean Bill Laimbeer), got stuck with Pride and Prejudice being taught to every high school class in America, and were subjected to the fucking Spice Girls. Really? Jeesh. As if Europe has not treated us poorly enough by using us like a young lady in Lawrence Taylor’s hotel room, now they have decided to have their whole fucking economy go to $0 because the loose union of countries can’t keep the weakest links from exhibiting worse moral hazard than Magic Johnson’s wife after finding extra strength condoms. Sure, we fucked up the whole financial system first, but for fucksake Europe, at least we know whom to blame. So clean your shit up because Money McBags doesn’t want to have another revolution and have to throw your tea away because his tea bagging is reserved for Faye Reagan only. As an aside, Money McBags is aware that every example he used above refers to Britain and their tea and fucking krumpets eating, bad teeth having, and fag smoking nation, and that Britain does not use the Euro and therefore is not the problem. That said, his commentary stands after all, we all know it wasn’t over when the Germans bombed Pearl Harbor.
In US macro news, ain’t a lot of good shit going on today. New claims for unemployment spiked to 471k, up 25k from last week and the first rise in five weeks which surprised everyone but the 20MM people looking for jobs. Riddle me this, with unemployment so high, how the fuck are all of these economists still getting paid for adding absolutely no value? It is a more fraudulent occupation than the Chief Compliance Officer at Goldman Sachs or Lady GaGa’s stylist. Not only were new claims for unemployment up, but the index of leading indicators was down .1% which was worse than economist guesses for a .2% gain as apparently they confused the word “leading” with “made-up.” Finally, the Philadelphia Fed said manufacturing rose to 21.4 but was short of the 22 predicted by consensus estimates. In that same report, the jobs number fell and more unemployment is only going to do wonders for the lovely metropolitan Philadelphia area where the motto is “if it’s not nailed down, it’s ours.”
Politically, the SEC continues to investigate what is now being called the “flash crash” because “high frequency trade off,” “stock schlock,” and “holy fuck what just happened” apparently weren’t catchy enough. When they’re done investigating the crash and can completely rule out trannie porn as the cause, Money McBags hopes they investigate why the market is going to $0. Also, Senate Democrats apparently voted down a proposal for financial reform because Senators Feingold and Cantwell didn’t think the proposed regulation went far enough and Money McBags applauds the state of Washington’s lovely Ms. Cantwell who couldn’t well pass the current legislation without stricter rules on derivatives. The junior Senator said “Even something like Hoover Dam with all of the great concrete and all of the great engineering and all the great things that make that structure work, still has a problem if somebody drills a hole in the bottom of it.” Well said and to be brutally honest, Money McBags trusts any 51 year old single, never been married, woman when she talks about needing to proverbially put fingers in dykes.
Internationally, well, internationally things are more fucked than Dexter Manley in a spelling bee or Keynesian economics. Germany’s ban on naked short selling continues to spook the market as German traders all run to their nearest Breuninger’s to load up on slacks. Making matters worse is that Greek workers are on a 24 hour strike, or what used to be known as “Tuesday.” Money McBags isn’t saying that Greek workers are lazy, but does it really take more than 300 years to clean up some rubble from the fucking Parthenon? I mean we now have things called cranes and bulldozers. Luckily, French economy minister Christine Lagarde said: “I absolutely do not think that the euro is in danger” before adding “it will provide great kindling for Europeans when they can no longer afford heat.”
As for stock news, well, everything was down, especially financials though the always optimistic, rarely right, and yet deliciously named Dick Bove (rhymes with “oy vey”) said banks stocks “may fall another 10% to 12% reflecting market fears but they are still very attractive investments.” He then opined, “Longer term, I still expect that these stocks will grow in multiples, not percentages, as long as we feed them after midnight, expose them to bright lights, and dunk them in water.” SPLS actually put up a good Q today, unfortunately the market cares less about performance than a John Meriwether investor. Staples CEO said he is a little more optimistic than he has been and raised the low end of guidance for Q2. Williams-Sonoma also posted better than expected profits, raised guidance, and said they are getting more positive about their customers coming back as apparently there is still a demographic that likes to buy overpriced shit that they don’t need. Also, Game Stop also put up a good quarter thanks to popular games like “Battlefield Bad Company 2,” “God of War III,” and “Erin Andrews Peephole Finder.” It’s no surprise that a video game retailer would put up a good quarter because stoners are still selling the shit out of weed, something about inelastic demand. Finally, Sears put up a shit awful Q simply because they are Sears.
In small cap news, everything is going haywire again except KITD has somehow moved up on another high volume day. Money McBags has talked about KITD all week but their sell of was overdone if you believe management. The spike in A/R has investors worried, especially as those receivables are tied to european revenues but management had a mostly logical response to the spike which Money McBags broke down the other day. One of Money McBags’ favorite small shorts (along with Bridget the Midget), WGO, has been getting hammered lately and he’d like to think it is because investors are finally realizing this company is not going to break even for at least another year and not just because everything is down. WGO simply does not earn money and now that inventories have been un-destocked, they can’t play the positive cash flow game anymore. Even if WGO were to somehow earn money, for the stock to trade at its current price of ~$12.50, WGO would have to earn $1.25 next year because Money McBags would never pay more than 10x for a company selling an expensive discretionary good with little operational flexibility in the biggest recession since Herbert Hoover stuck to the gold standard. So if you want to play the downside, shorting WGO is a decent option. That said, when the market settles down, Money McBags will be looking to add with companies like CTGX, ARTG, TMRK, RICK, and QCOR on his to buy list. But hey, be careful out there.
The market continues to sell off as Angela Merkel happily plays her fiddle atop the Zugspitze while Europe burns below. The debt crisis in Europe continues to gain momentum like it has an improbable, though theoretically possible, coefficient of restitution greater than one or as if it were running for office with the promise that Amanda Carrier will personally “thank” every voter. ECB president Jean-Claude Trichet (also known as the peon from Lyon from his starring roles in Bubble Impact and Wall Street Fighter) warned of an uncertain outlook for the EU after the ECB held rates at 1%. The uncertainty stems from the EU not being sure if Europe’s impending bankruptcy will be caused by hyperinflation or just good old fashioned default. He also defended the ECB’s decision to suspend Greece’s bond ratings by saying “well, we didn’t have a rating lower than junk, so it wasn’t really a tough choice” and when queried about Spain and Portugal, he responded that they are “not in the same boat” as Greece, before mumbling “They’re in the boat that is sinking next to Greece’s boat.” Trichet then lauded Greece’s austerity measures and shrugged while claiming if they didn’t work “c’est la vie.” Slightly positive news is that while Spain’s cost of raising debt was up by ~80bps and a quart of paella, demand remained strong with their latest bond offering being oversold by ~2.5x. However, rumors are that the EU is looking into what is being called a “nuclear option” of buying government debt in the secondary market in order to help keep demand and liquidity at reasonable levels and if that doesn’t work, they will try the “nuclear cough option” which is trickier and has a stronger possibility of backfiring. The point is there is some bad shit going down in Europe and the scary part is that the US suffers from many of the same issues since we love eating hamburgers today, even though we’ll have to pay for five of them on Tuesday. Money McBags prefers to think about baseball, bunny rabbits, and Alice Eve and thus sweep the impending economic crisis under the rug because if he stops and focuses on the real issues he gets nauseated enough to give even the most discerning emetophiliac a stiffy.
In the US, Retail sales slumped a bit in April with some analysts blaming the earlier Easter season and others blaming something called 10% unemployment. Speaking of unemployment, new claims for unemployment dropped last week by 7k to 444k or as Moses Malone would say “fo fo fo.” Economists were guessing claims would drop by 11k so the number was a bit of a disappointment, though not as much of a disappointment as Ron Palillo’s career. One thing that may be keeping claims down is the productivity rate in the US which grew 3.6% and bested economist guesses of 2.5%. See as workers and production become more efficient, employers need to hire fewer people thus prolonging the unemployment cycle. So a big fuck you to all of you efficient workers who are keeping the unemployment rate so high that the economy is still struggling. If Money McBags were president, and trust me he has turned down the nomination many times, the first thing he would do would be to hire Alan Greenspan, just so he could fire him again, the second thing he would do is make Hayley Atwell his Undersecretary of State, and the third thing he would do is promote the terribly NSFW guesshermuff to the work force thus sinking their productivity as they spend hours mastering the competitive sport of muff guessing. And with that one move, producitivity would decrease enough to cause companies to hire more people and thus unemployment would start to abate. Problem fucking solved (and to be honest, Money McBags would love to solve any problem the still NSFW 1600 has).
In stock news, MGM posted a loss thanks in part to their CityCenter development on the Las Vegas strip which had a $255MM operating loss. Apparently people stopped buying overpriced condos in overdeveloped Las Vegas and CityCenter went through a drastic hooker shortage. MGM is trading down 6% on the day but promises it will make it up to investors tonight when they finally hit a hot streak at the craps table. Nintendo is down 3% on a disappointing Q as apparently Mario finally saved the Princess from Donkey Kong thereby leaving the franchise to spend some time alone with his long lost fair maiden. Sales of the Wii were down 20% for the year and the company is guiding to further declines as the market becomes more competitive and saturated and teenagers start to discover something called “outside.”
In small cap news, everything is pretty much getting shit on like it is playing the foil (or perhaps the saran wrap) in a German scat film. One company Money McBags has talked about before though never felt comfortable enough to own, HIL, just put up a craptastic quarter and is down a whopping 24%. HIL is a project and claims manager for construction projects with most of their revenue coming from outside the US. Money McBags has not listened to their call yet but he went through their release and it looks like the problem stemmed from cost controls worse than those of Stephen Baldwin. Revenue was flattish and basically in line at $104.5MM vs analyst guesses of $106MM but eps missed by a wider spread than Larry Craig in a Manhole bathroom. Analysts guessed eps would be $.11 and it came in at $.06 as SG&A rose from 31.4% to 33.0% of their consulting fee revenue which is a heck of a lot of nights out at the Dubai Rick’s Cabaret. Not only was SG&A up, but backlog fell from $620MM to $540MM, 12 month backlog fell from $280MM to $240MM, and Money McBags’ back log fell after eating a bean burrito with extra hot sauce. Most of the damage was done in their claims management business which is ~75% of revenue and was down ~8% organically largely driven by business in the Middle East (perhaps they lost out to the Bluth Company in building construction in Iraq). Money McBags isn’t sure what the fuck is going on with this business as managament had mostly indicated that things were ok so it is not clear why they managed costs like Corey Feldman has managed his career. If you annualize this Q’s EPS and EBITDA, the company is trading at 20x eps and ~9x EV/EBITDA even with the down 24% today. Unfortunately, that seems a little too pricey until we can understand why SG&A went up so much and how they are going to backfill the loss of organic growth in the Middle East (and speaking of backfill, Money McBags would love fill Marissa Miller‘s back).
And loyal readers, don’t forget Money McBags is on twitter and since he is providing you with top level analysis, insights, and plenty of dick jokes all out of the goodness of his way too big heart, how about telling a friend or 10,000 about When Genius Prevailed? Could you help an analyst out?
Before we get to the markets, Money McBags found a picture of the hottest female in the history of history and wanted to share it with his readers as a sign of his gratitude. This is the hottest female ever*, so you’re welcome. Anyway, stocks are up today as macro data was more encouraging than a Stephen Hawking pinky raise or Anne Sullivan Macy. The ISM reported that manufacturing expanded at its fastest pace in 5 years to a whopping 59.6 (and if it had been 59.9 the market may have shot more loads than a Japanese bukakke film). Prices paid (cough, inflation, cough) drove the index higher while the unemployment gauge slipped once again. More importantly, first time jobless claims fell to 439k, while even more importantly, Audrina Patridge is hot. The Street is hoping that the 6k drop in first time unemployment claims will bode well for the Labor Department’s unemployment report to be released tommorow on paper made from the tears of the homeless. However, providing the proverbial turd in the punchbowl, or the penis in the MFF scene, was a report released today by some firm called Challenger, Gray, and Christmas who bah humbugged on the labor market by reporting that job cuts accelerated in March. The outplacment firm announced that the pace of job cuts had increased 61% sequentially from February but optimists will point out that the job cuts were down 55% from March of last year. So hoo-fucking-ray. The economy is either better or worse depending on your comparison. It’s like the old saying, in the land of the blind, the one-eyed man is king (though in the land of the blind, the one-eyed man better not develop macular degeneration because there sure as fuck won’t be any ophthalmologists).
International markets are all a buzz today as Asia and Europe saw strong manufacturing reports which signal the recovery is coming. China’s manufacturing expanded for a 13th consecutive month, Europe’s manufacturing industry expanded at its fastest pace in three years, and somethng in Japan called the Tankan index of sentiment jumped from minus 25 to minus 14. April fucking fools!!!!!!! Oh wait, that data is actually real. Wow. The international markets may have found their Viagra or Peter Gowland’s private photo collection.
In stock news, RIMM missed their earnings estimates by $.01 eps and their revenue estimates by 6%. So despite earning $1.27, showing better margins, and growing 18%, the stock is down 5%+. Money McBags is actually surprised it isn’t down more because when a growth stock in a competitive market needs to make their numbers and whiffs, nothing good can happen. Goldman Sachs cut their rating on RIMM to sell and basically called them a has been in the handset market. Their products are less differentiated than a Dahm triplet and a whole lot less delicious. Money McBags puked out his RIMM shares because fool me once, shame on me, fool me twice and you can go fuck yourself.
In small cap news everything is up except for Chinese power generation company APWR who handed out fortune cookies with their earnings release yesterday that all read “suckers.” Their guidance was 30% below analyst guesses who apparently were just chasing windmills when covering the stock (and that is funny because APWR produces windmills, but you all knew that anyway, right?). Also, there was a comment in yesterday’s blog comment section asking about MLNK and Money McBags will address it here. The reader wanted to know what was going on with MLNK and if it is still a hold. Money McBags broke down their fuck awful quarter a few weeks ago and nothing has changed since then of which he is aware. They earned $13MM of EBITDA and said this upcoming Q was going to be worse while they would see some sequential improvement after that. Of course they also said that last quarter would be flat and it was down worse than a than a clinically depressed person who just lost their dog and had a virus wipe out their computer’s porn collection, so who the fuck knows if management can be trusted. Their excuse for missing the quarter is still a little squirrely as they blamed their clients for delaying decision making but Money McBags doesn’t quite get that. HP’s revenues were up ~10% and HP is like 25% of MLNK’s business, so why the fuck didn’t that help drive revenues more? And if MLNK is earlier in the cycle, why did they not see revenues jump by more in the previous Qs or why is their revenue being impacted by clients delaying their decision making now (since decisions should have already been made for this upcoming cycle). The simple fact is the company is underperforming, but even so, they still earned $13MM of EBITDA in the Q. They have a $163MM in cash and a $375MM market cap so an enterprise value of $210MM. If you think their business bounces back after likely sucking this Q coming up (Money Mcbags’ words, their guidance), then a $52MM EBITDA run rate is possible and thus they are trading at 4x that. The stock is cheap on that basis, but on an EPS basis, they’ll probably be lucky to earn $.45 this year so are trading at almost 20x that for no growth. The EV/EBITDA and cash give us some downside protection so Money McBags sees no reason to sell, but he also thinks this is dead fucking money for a while. Their business should ramp with electronics sales (though it didn’t despite HP being up 10% as Money McBags said earlier, so if someone can explain that, Money McBags is all ears), so if the economy can really come back, they should be able to grow the business. Look, it ain’t fucking AAPL, but it is sort of cheap with a cash cushion that has some nice operating leverage. So in short, the downside seems a bit limited but the upside may be further away than Paris Hilton’s Academy Award (One Night in Paris excluded).
*April fucking fools’.