Posts tagged FHCO
8/6/10 Midafternoon Report: Jobs number disappoints again as people ask “Brother, can you spare a dime, and maybe a 401k?”
The market fell for most of the day before being bizarrely bailed out at the close for no reason other than to seemingly allow Money McBags to write that alliterative phrase. The big news was that the jobs report once again disappointed like the other side of a Goldman CDO deal or Tara Reid’s plastic surgeon. The July jobs report showed the economy lost 131k jobs driven by a 143k decline in temporary census workers, a 59k decline in other government workers, and a 99% decline in hope. The positive spin is that private employers added 71k jobs though that was below the 90k analysts guessed but up from the DOWNWARDLY REVISED June made up number of 31k (and that was DOWNWARDLY REVISED from the bogus 83k number which Money McBags eviscerated last month and means that at least 221k jobs were lost last month, not 125k, but what’s another 100k to the 16.4MM people unemployed?).
With all of the revisions, the headlines and the numbers are less believable than Lawrence Fishburne ever being up for Father of the Year or the Laffer curve. Rather than trusting the headline, Money McBags once again went to the BLS’ actual press release (and as always the “L” in BLS is silent) to look at the numbers since headline writers and financial analysts treat due diligence as if it were going to give them herpes of the brain (and not regular herpes, but porn star herpes).
The most interesting thing that Money McBags found is that the fictitious birth/death model, which may be the most famous black box Robert DeNiro has never entered, had little impact on the manipulated numbers. The birth/death model adjustment was only 6k so the 131k reported number was likely at worst 137k. That said, in breaking down the numbers we see that 59k non-census government jobs were lost, and those may or may not have been permanent and may or may not include Maxine Waters’ husbands’ bank auditors, but it is something that has been glossed over by the media. Sure seeing private sector job growth is important, but if it is at the same level as lost government jobs, we’re just robbing Peter to pay Paul or robbing Spitzer to pay Dupre (which actually, wouldn’t be so bad).
Money McBags did find one discrepancy as the BLS report says that:
“Employment in professional and business services was little changed (-13,000) in July. The number of jobs in temporary help services showed little movement (-6,000) over the month.”
And as you can see in the above chart, Money McBags did not factor in the 6k reduction of temporary jobs, assuming them to have been grouped in with the professional and businesses services (though they weren’t last month), so one might be able to further increase the jobs lost number by 6k, but people care less about 6k more job losses than Economists care about how their ideas work in practice (the answer is not good) or Britney Spears cares about underwear.
The unemployment rate remained at 9.5% thanks largely to another 350k people simply leaving the labor force (yes, the math is that convoluted) and thus causing that stagnant metric to be more misleading than the movie titled The Banger Sisters. But hey, as long as we keep losing jobs and the unemployment rate only gets better or stays the same, everything is fine. In fact, Money McBags suggests a radical, though more honest strategy, were everyone just leaves the fucking labor force by claiming they don’t want a job and thus the unemployment rate will artificially drop to zero and the government can pat themselves on their filibusters about what a great job they have done. Problem solved, election won.
Anyway, the real unemployment rate which includes those people who have become more discouraged about finding a job than Sisyphus was pushing that fucking boulder or Heidi Montag’s singing coach was trying to teach her to sing on key, remained unchanged at 16.5%. So the economy remains about as healthy as Dick Cheney’s fictitious heart.
Internationally, there wasn’t much news today other than that Russia continues to herd themselves some grains as the country faces it’s worst drought since Rasputin’s liver was fully functioning. The ban on exports of grain has caused a global spike in wheat prices and led to a rally among companies specialized in fertilizer (and Money McBags would love to fertilize her).
In stock news, KFT put up a nice quarter with profit up 13% thanks to their recently acquired Cadbury business which saw gum sales bubble up in Latin America, chocolate sales sweeten in Asia, and loads of soggy biscuit sales metabolize in Europe. Taking out the Cadbury acquisition, sales were up 2.2% but the company moved the low end of their organic growth guidance from 4% to 3% due to aggressive promotions in the US and the fact that people don’t have any money.
In other market news, AIG annonuced earnings and they either beat, missed, or came in-line with analyst guesses. The company’s financials remain more obfuscated than Caster Semenya’s gender and Money McBags would rather calculate pi to the 1MMth decimal using only a slide rule, a broken abacus, and Abe Vigoda’s nut hairs than analyze an AIG earnings release. The company claims their adjusted net income was $1.2MM on $2.2MM of operating earnings leaving adjusted eps of $1.99 but Money McBags trusts any of those adjustments about as much as he trusts Leprechauns.
In small cap news, TMRK traded off after a big jump yesterday on it’s quarterly earnings release. Money McBags wrote about TMRK yesterday and thinks it is an attractive long term hold (though not as attractive of a long term hold as Alice Eve), so he certainly likes today’s entry point better than yesterday’s which was likely inflated a bit by short covering. Like he said in his analysis, he is unconcerned by quarterly or even daily fluctuations as this is a core small cap position. QCOR also sold off today before recovering near the end of the day as the market is basically punishing any company that ran up on good earnings. Keep an eye on QCOR as you may get a very attractive entry point (though not as attractive of an entry point as Jenn Sterger‘s mouth).
In other small cap news, a tiny little company which Money McBags has written about before, FHCO (use the search box for his break out of their last Q and earlier company deep dive), announced their earnings today and the number was so bad that not even an FC2 could prevent it from giving someone AIDS. Revenue was down ~70% in the Q to $1.8MM and operating income was down 99% to $21k leaving the company with a whopping $0.00 eps. Wow. That sounds worse than the melodic stylings of Celine Dion and yet the company was only down ~5% because according to the company 2 big orders simply got pushed back. Whew.
The good news is that the the company said Q4 is proceeding as expected and that “the two pending orders represent significantly larger quantities than the customers’ most recent previous orders.” So in every thing but practice, the top line should be growing.
The bad news is that it’s not clear when the delayed orders will actually hit the bottom or top line as management also said “The Company cannot predict when the pending orders will be received or which quarters they will impact.” In addition to saying: “Delays such as these, which are usually due to bureaucratic issues, politics and/or changes in personnel, generally may last from 3-4 weeks to 6 or more months.” Money McBags likes that explanation a fuck load less than if they could have just said “we’ll send those orders out in Q4″ because it highlights that they have about zero control of their sales process as they are dealing with large public sector entities who either have or don’t have the funding. Since they have no idea when these orders will come in, they dropped their operating earnings growth from 30%-40% for 2010 to 10%-20%.
Again, Money McBags finds this to be an interesting, yet highly bizarre little company that actually has a decent business model and should start seeing some earnings momentum with the switch to the lower cost product. Their gross margins went up from 48% last year to 54% in this Q, though they were down from 58% last Q which Money McBags will assume is the result of underutilized factories due to having orders pushed back, but one should keep an eye on that (one should also keep an eye on Sofia Vergara).
Anyway, lets assume the company is telling the truth and the delayed orders are some bureaucratic snag because dealing with governments and public sector funding is more of a pain in the ass than a thrombosed hemorrhoid. The company was earning ~$7MM per Q in revenue but on the call they said an order of 12MM units had doubled to 24MM units so there is some growth to the top line. Therefore, let’s say they hit no more delays and can earn ~7.5MM in revenue per Q at a 54% margin with operating costs of ~$2MM (slightly higher than where they have been) and the company still doesn’t paying taxes. With those numbers, the company should earn ~$.28 next fiscal year (excluding any increase from these delayed orders being shipped in 2011) and it’s now trading at ~17x that but they pay a $.05 quarterly dividend (~4% yield) and have a decent enough balance sheet with $3.9MM in cash and no debt (though if orders keep getting pushed out, it will become harder to pay that quarterly dividend).
Last quarter when the stock was trading >30% above where it is today, Money McBags said “this stock is a bit ahead of itself unless they can continue to grow earnings at 20%+” so he certainly is a lot more interested in the company now than he was then, but the delayed orders do make him nervous enough to not yet take a position in the name (unless that position is reverse cowboy and the name is Sara Jean Underwood), so he’s going to hold off again on this low liquidity stock while the economy gets worse. In theory, they should actually do well in a bad economy because their funding is set, but Money McBags would rather buy it when their delays are fixed and he’s not left wondering if they will have the capacity to make up for the delayed orders while filling their new increased orders. If it gets to <$4, Money McBags will likely take a closer look at buying a position.
Anyway, have a good weekend and remember to tell a friend or 10k about Money McBags and the award winning When Genius Prevailed.
5/19/10 Midafternoon Report: VIX shoots up, claims it doesn’t have a problem, just wants to try to take its mind off global recession
The market got clobbered again today (until a closing minutes rally) like it insulted Preston Brooks’ uncle or like it had one too many shots of tequila while watching the donkey show. Investors continue to fear the impending doom of Europe with their quaint monetary system, silly accents, and love of black jeans. However, macro news in the US was marginal today with inflation at its lowest level in 44 years which should allow the Fed to keep rates at historic lows until it causes the next bubble. Core inflation, which takes out the effects of things on which people actually spend their money like food, energy, and lap dances, was flat and thus led to the lowest 12 month gain since LBJ was president, yo-yos were a fad, and full muff was the style. Overall though, consumer prices fell by .1% so on average the little money you have left will now get you .1% closer to buying some shit you can’t afford. On the housing front, mortgage demand shriveled up worse than your “jumbo arm” after diving into the arctic ocean immediately after viewing a Hanna Hilton opus. With the federal tax credit for homebuying now expired, mortgage purchase applications fell by 27% despite record low rates and home sellers making sure all of their carpets match their drapes (and for the record, Money McBags is not in favor of carpeting for his hardwood). Making matters worse is that foreclosures rose to a record high 4.63% and now 1 out of every 7 homes is either in foreclosure or delinquency or as it’s known on the Street “a AAA rated Goldman MBS CDO.” Finally, the SEC is trying to put in circuit breakers for all S&P 500 stocks to combat the stranglehold high frequency traders have on the market (and as always, Money McBags is a big proponent of the Camel Clutch as the best stranglehold). While these measures may have the effect of bringing a knife to a gun fight or hiring Magic Johnson to judge a grammar contest, the circuit breakers will seek to pause trading for five minutes if the price of a stock moves by 10% or more in a five-minute period or if Bar Refaeli show up on the floor of any exchange.
Internationally, investors are still freaked out by Angela Merkel’s preemptive strike on naked short sellers and will make sure they have an extra pair of pants with them at all times just in case. Germany’s new shortng regulation has caused investors to wonder what exactly German leaders know that is not public as German bank stocks have yet to come under attack and usually politicians wait for things to crumble before acting. Strangely, the rest of Europe has not followed what could now be the biggest Merkel boner since Fred failed to touch second base (and Money McBags would never fail to touch Angela‘s second base). The failure of other european countries to follow Germany’s lead in regulating their markets is causing investors to question the strength of the EU while applauding Europe’s sanity because we all know what happened last time Europe followed the Germans.
In stock news, does anyone really care? No seriously. The market is not trading on fundamentals right now as forecasts for next year are more dubious than receiving a letter from Ted Kaczynski. Money McBags has been harping on analysts using normalized earnings as a valuation metric for awhile now since normalized went out the door with subprime CDOs, easy credit, and the advent of the very NSFW muff guessing (though Money McBags does use normalized earnings in his EPAX valuation, but there is something to be said about being logically inconsistent, just ask Mark Souder who apparently values families so much, he has more than one). Anyway, HPQ put up a nice quarter last night, beating analyst estimates and raising guidance thanks to strong demand for their PCs, a resurgence of their printer business, and absolutely no influence from Carly Fiorina in the past five years. The company earned $1.09 per share, beating analyst guesses by $.04 and gave full year guidance of $4.45 eps to $4.50 eps which topped analyst guesses of $4.45, or by about the amount of their beat this Q. The printing division grew revenue by 8% as they apparently supply the US Treasury with laser printers to spit out more dollars. In other stocks, TGT put up a solid quarter though not nearly as delightful as BJ’s who swallowed up the competition. BJ’s beat estimates and saw a 4% increase in customer traffic thanks to higher sales of candy, cigarettes and awesomeness.
In small cap news, once again Money McBags favorite KITD is getting demolished on high volume. Either a large owner had a margin call, a Portia De Rossi fat finger, or just wants the fuck out like Ricky Martin trapped in a closet. Here is what Money McBags knows:
1. CEO Kaleil Tuzman bought 100k shares the other week. When a CEO is buying, that usually means good news unless the CEO is Ken Lay and he is buying Enron. That said, this should be at worst slightly positive.
2. Their Q was ok by Money McBags’ standards but caused analysts to increase targets. This should be a slight positive as obviously, analysts are just guessing.
3. They diluted the shit out of shareholders last month and have yet to put the majority of that money to work. This is a big negative.
4. They are levered to EU revenues. Another big negative, like hiring Bernie Madoff to help allocate your assets.
5. Kelly Madison puts the ILF in MILF. And that is a huge positive for everyone involved.
6. When the markets are diving, nobody wants to own a weird little company posting negative eps (thanks to one timers and derivative charges) with a promotional CEO who just wants to build something big enough and quick enough to sell. There is obviously risk, that is why they call it gambling, I mean investing.
A lot of little stocks are taking it in the yingus right now. Look at former Money McBags favorite RICK which is down around 30% from where we sold and almost 40% from the top (and it is definitely time to start the due diligence on this stock again, especially if it invloves doing a stress test of their performers’ assets). Heck, FHCO was down 5% today, which was not unforseen by Money McBags, but their business is fine. The point is, no one wants to own dinky little companies when the world is going to zero, so take a deep breath and do some real due dilligence now because when the market stops falling, there will be some very good buys.
5/13/10 Midafternoon Report: Market down as Prozac prescription runs out, or common sense prevails, take your pick
The market bounced around today before closing down as it seemingly takes a breather from a week so volatile that it caused quants to come out of the closet and question their autoregressive conditional heteroskedasticity (but that is what they get for having a GARCH model and not Brooklyn Decker as the centerfold for last month’s Automated Trader Magazine). In US macro news, new claims for unemployment were down slightly, or they weren’t, depending on who is making up the data this week. According to the Labor Department, claims fell by 4k from last week to drop to 444k new claims. Of course last week, claims dropped by 7k to also reach 444k. Hmmm. Now look, Money McBags is no Stephen Hawking (and that’s not just because Money McBags isn’t a professor of Mathematics, but also because Money McBags can walk), but if new claims for unemployment were 444k last week, how the fuck could they fall by 4k to the same 444k this week? Unless high frequency traders have also begun manipulating the laws of mathemetics, Money McBags is pretty sure 444k – 4k = 440k. In fact, he’s more sure of that than he is sure that Cheryl Cole is hot and that John Edwards is not just a scumbag, but also has bad taste. So what say you Department of Labor with your statistics, PhDs, and cluttered website? Is this some new kind of math that will lead to solving the great P=NP problem or finally answer the question of how all of those clowns fit in to that one little car? Ohhhh, I see. Apparently, the Labor Department revised last week’s number up by 4k to 448k in order to have another positive headline this week. So good on you Hilda Solis, because who can’t get logically confused and thus miss the point by reading “new claims for unemployment fall by 4k from 444k to 444k.” And the point of all of this is new unemployment claims are stagnant, or they’re not, apparently, it depends on what day you ask, but things are not getting appreciably better. In other US news, the NY AG is going after banks who may have lied to ratings agencies about what was in their MBS CDOs. Wow, really? You think the banks were fudging the details a bit or do you think rating agencies were turning their heads the other way and coughing as the banks cupped their bottom lines? Or do you think, I don’t know, that everyone was fucking complicit? Jeesh. There were more shenanigans going on in CDO deals than there were in Lawrence Taylor’s hotel room last week. If the SEC, NYAG, or the ghost of Nipsey Russell wanted to seriously prosecute the banks, it would take like one second of research to do so since the banks have been manipulating markets since Alexander Hamilton donned a powdered wig and let Maria Reynolds sample his US Mint. So a big fucking yawn until someone actually does something to protect investors.
In international news today, the ECB is trimming their purchasing of Italian and Spanish bonds after trying to save the market from collapsing in a pool of its own inflation. By providing liquidity to the Europe bond markets, the ECB hopes they have fooled investors into thinking there are actual bids in the market and are also hoping that investors will continue to have shorter term memories than Charlie Sheen’s wife. Also, Portugal announced an austerity plan following the leads of Spain and Greece. When Prime Minister Jose Socrates was asked if he would also jump off a bridge if Spain and Greece did first, he replied that it would depend on the height of the bridge and the motion of the ocean beneath. Portugal’s austerity plan calls for a 5% cut to the salaries of senior public officials, increases in value added taxes, and the end of free Madeira Mondays.
In stock news, CSCO reported a solid Q (and Money McBags is an owner of CSCO), yet is getting walloped after CEO John Chambers gave forward guidance weaker than a warm O’Douls. Revenue and earnings both beat analyst guesses as the company grew topline 27% thanks to increased demand for web and video applications and showing topline Austin Kincaid‘s greatest hits. Guidance was lacking though as revenue for the upcoming quarter was forecast to be $10.7B which was inline with guesses but below the high end estimates of $11B. With the stock overreacting to that news, Chambers went on CNBC to try to do some damage control by reminding investors that they were going to grow revenues 25%-28% and that the market was “over interpreting” what he had said on the conference call. The fact is, when a company like CSCO can grow 25%+ and is selling off, you should think about building a position as the internet, data, and the NSFW spankwire.com aren’t going anywhere and will need CSCO’s back end solutions to keep them running (though I hope they never find a solution for Alexis Texas’ back-end).
In small cap stocks today, CRUS continues to run and stomp all over Money McBags’ hopes and dreams. Money McBags was in at ~$7.75 and yet sold last week on liquidity fears, so good on all of you who still own it. Money McBags promised he’d take a look at FHCO’s Q and he finally had a chance to do so though he still has yet to test out the product like all good investors should. FHCO’s Q was rather uninspiring and frankly a little confusing. They earned $.06 per share which was down from last year’s $.07 per share due largely due to increased operating costs. Revenue was flat with last year though that was to be expected as they shifted to the lower priced, higher margin, better tasting FC2. So while revenue was flat, gross margin was up from 53% to 58% yielding a 7% increase in gross profit thanks to 23% growth in units (Money McBags will allow you to write your own unit growth pun for that one as it is just too easy, like Tila Tequila after a shot of whiskey). The problem they had was that operating expenses were up by $600k or ~40%. What is not clear is how much of the increased expenses were one-time charges and Money McBags has not listened to the conference call yet so perhaps they answered it. $120k was due to stock comp and $100k looks like it was due to restructuring and exiting their FC1 UK operations, but the rest of the increase seems ongoing as $60k was for marketing the FC2 in US retail channels and $100k was for staff expansion and team training (and Money McBags would expand his staff and train a team on FC2 free of charge if that team included Kate Bosworth and Alice Eve). Anyway, if ~$220k was onetime, eps would have been closer to $.08 per share but that is not the kind of growth one would like to see. The company maintained their guidance of 30% to 40% operating income growth which would put their operating income ~$6.5MM and their operating EPS ~$.23 per share. But even with an increase in expenses, their operating eps this Q was $1.9MM so they are at a close to $8MM operating EPS run rate which would equate to $.28 per share. The point is, this company is trading at over 20x that and it’s not clear how much that is going to grow next year. Sure they have a nice yield with $.05 quarterly dividend and $5MM cash and no debt on the balance sheet, but Money McBags thinks this stock is a bit ahead of itself unless they can continue to grow earnings at 20%+. If operating earnings grow at 20% next year from the current $2MM per Q run rate, the company could earn $.30 to $.35 per share next year and is trading at a reasonable mulitple for that. So Money McBags wouldn’t be buying here, but this remains an interesting little company.
Buenos dias on this lovely Cinqo de Mayo as investors smack the market like a pinata in hopes of breaking it open to catch some falling CDS. Things remain ugly today as Europe is still on the verge of going bankrupt thanks to Greece’s steroidal Wimpy strategy of having a gyro today while promising to pay for five of them on Tuesday. Unfortunately this strategy is finally coming back to bite Greece on its hairy proktos. Fear continues that Spain and Portugal will be next to need bailouts while even more fear continues that Heidi Montag will put out a new album or Alan Greenspan will find someone to listen to him again. Moody’s put Portugal on review telling the country that they need to start paying down their debts, show up to class on time, and stop throwing spitballs at Spain. Moody’s is threatening to cut Portugal by two notches from the contrived “Aa2″ to the less contrived “AaYour’efucked.” Of course as always, Money McBags cares what the rating agencies have to say as much as he cares about John Meriwether’s advice on starting a hedge fund or Fabulous Fab Tourre’s sales pitch for subprime bonds. Moody’s will likely be late once again to the dance with their downgrade of Portugal as by the time Moody’s figures it out, Portugal will long have fled the prom in a fit of tears after busting out of their prom dress and leaving their assets exposed and devalued. Making matters worse in Europe is that Europeans hate to shower and it’s getting hot outside, but making matters even worse than that is that three people were killed when Greek workers protested the new austerity measures yesterday. On the bright side, that is one way for the government to extinguish the debt, though on the negative side it’s a bit morally lacking. In the protests a bank branch also burned to the ground, luckily, the bank only held subprime debt and thus was worth more as ash than as a solvent entity. And finally, EU central banker Axel Foley Weber warned about “grave contagion effects” of the Greek debt crisis for the rest of Europe but added that it doesn’t mean the EU should use every instrument necessary to quell it such as more bailouts, rate changes, or sticking bananas in tailpipes (though if it is Kristin Bell‘s tailpipe and Money McBags’ banana, Money McBags will heartily disagree).
In US macro news, ADP reported that 32k jobs were added to the economy and it was the third month in a row of increases while Challenger, Gray & Christmas stopped by for some milk and cookies before reporting that planned layoffs decreased by 40% from the previous month. Also, mortgage applications soared to a 7 month high thanks to the ending of the federal home buyer tax credit and an extra strong dose of meth while the ISM reported that service industry expanded at the same pace as last month as a result of a Viagra milkshake and being shown Carmen Electra workout videos.
In stock news, News Corp put up a good quarter thanks to revenues from Avatar which Money McBags will see as soon as he grows a vagina. The company is trading down 5% though as they warned of a likely fourth quarter profit decline due to rising costs and lower revenues in their Fox network TV business, decelerating revenue in their cable business, and lower revenues in their film division as they are replacing Avatar with a film slate including the sequeals Alvin and The Chipmunks Get Rabies, The Thunder From Down Under Presents: What Happens in Vegas, and My Big Fat Greek Bankruptcy. In other market news, GOOG is up today on news they are going to start selling e-books and investors realizing that GOOG is only a nut hair away from world domination.
In small cap stocks, Money McBags’ biggest small cap holding KITD is getting pounded like they walked up to Brock Lesnar and told him not only is his mom a whore, but she’s like a shotgun because one cock and she blows. KITD has ~70% international revenue so with Europe about to join Atlantis and Chritsina Applegate’s breasts in the annals of fictional places that once really existed, it is not a surprise that there is some movement down. That said, Money McBags believes in this company and is in it for the long term (and by long term, he means until CEO Kaleil Tuzman sells to CSCO or whomever). Tomorrow pay attention to EBIX reporting quarterly results which Money McBags is sure will look good but will lack any semblance of detail as that business is more obfuscated than John Goodman’s belly button or Tiger Woods’ sense of dignity. On any metric the company is a screaming buy yet the red flags with CEO’s disdain of the Street, his self promotional nature that makes Kim Kardashian seem like a recluse, and his penchant for changing auditors like Ben Roethlisberger changes alibis, is alarming. Money McBags is going to stay away but if any of you can get comfortable with whatever it is in the insurance business they are doing other than installing johnson rods, you could have some nice upside. FHCO also reports tomorrow and with any luck they will have been protected from the European debt disease. FHCO has had a nice run on good earnings and a newly declared dividend and remains a strange and small company which Money McBags likes. He doesn’t own it as it ran a bit too much for him but he’s going to reconsider after they report the Q. Money McBags did make a couple of trades today by hedging his portfolio with EPV and selling his CIT shares for no reason other than to take profits and get some risk off the table. CIT should actually fare well with new CEO John Thain, a cleaner balance sheet (but who really knows for sure how clean it is no matter what the 10k says), and a valuation of right around book value. Should the market continue to drop, Money McBags will look to re-enter CIT while should Abigail Clancy‘s knickers drop, he will look to re-enter her.
It’s the jobs, stupid. Good Friday was great Friday for the economy as investors got the day off to spend their hard earned dollars on cheap imported crap from China while the Labor Department released monthly data showing 162k jobs had been created. Labor Department Secretary (though Money McBags prefers the more politically correct term Labor Department Administrative Assistant) Hilda Solis, was heard exclaiming “it’s on bitches” after the report was released and was seen vociferously taunting “I got your fucking jobs right here.” Sure the economy has lost 8MM jobs during the recession, but at this rate we will have gained them all back in four short years, just in time for the next bubble to be burst (China anyone?). Before we get more excited by the jobs report than we were to find out that the lovely Anna Paquin is bisexual, the numbers need to be looked at objectively. While 162 jobs were created, 40k were temp jobs (likely people being hired to clean out the offices of those recently laid off), 48k were temporary census workers hired to make sure people correctly fill in the boxes (perhaps they should have just hired Peter North to make a box-filling instructional video), and the number of jobs created lagged the guesses of economists. Still, jobs are fucking jobs so even if they are mostly temporary, the more people who are employed, the fewer people the government has to support (like the 16.8% of Americans who are underemployed), and the more money people will not be saving in order to buy iPads they can’t afford. So hooooooooooofuckingray. In other US macro news, pending sales of US homes rose 8.2% which is the second biggest gain on record, nudging out the “buy one get one free” promotion installed by Alan Greenspan in late 2001. Finally, the ISM services index jumped to 55.4 from 53 and above economist guesses of 54. Money McBags has no idea what this means but anything above expectations is good, unless expecations were for the number of new AIDS patients, the number of Kathy Bates nude scenes in existence, or the number of gangbangs in which your current girlfriend has taken part.
In stock news, the iPad is out which means any day now cancer will be cured, there will be peace in the middle east, and we will finally get money shots in to lesbian porn because the iPad is that fucking good. Sales of the iPad on opening weekend were stronger than Magnus Ver Magnusson after a week long double steroid cycle and analysts have upped their price targets on AAPL to what ever is a bit higher than infinity. According to reports, 300k iPads were sold over the weekend with expectations now for ~5MM sales for the year which is more than the population of Ireland, Singapore, or Paris Hilton’s pants.
In small cap news, the Apple momentum continues to push CRUS higher (Money McBags broke CRUS down again for all of you last week) while FHCO perhaps forgot to protect itself this morning and is down 4% on no news other than it has run about $1 too much. Money McBags is more short of time this week than Dennis Hopper is so he likely won’t be able to provide dick jokes or market analysis until Thursday. He may pop up on twitter now and again or be able to pop out some quick analysis Tuesday night, but for the next few days you’re all more on your own than a deep thinker at a Tea Party. Stocks for all of you to keep an eye on include TMRK and KITD so do your work and remember to have your pets spayed and neutered.
3/15/10 Midday Report: March Madness is officially here as Moody’s thinks people actually care about what they say
The market is flattish today, likely taking a breather to fill out its NCAA bracket while trying to sleep off the headache caused by Dick Vitale’s pontifications yesterday on how loving Mike Krzyzewski is post-coitus. That said, Moody’s is out warning that major economies such as the US, Germany, the UK, and Vivid Video may be closer to having their debt ratings lowered as growth may not be enough to “resolve an increasingly complicated debt equation.” Hey Moody’s, Money McBags has your increasingly complicated debt equation right here and it equals “go fuck yourself.” No really, do it. Money McBags is going to sit here and wait until you take your credit scoring model and shove it right up your asset backed security and wherever else the CDO doesn’t shine. Here’s the deal Moody’s, you are not very good at what you do, you are as good at your job as Bernie Madoff is at investing or Kirstie Alley is at dieting. You completely missed the whole fucking sub-prime collapse and you know what? That was your only fuckng job. It’s like if Robert Newman forgot to bring lanterns to the steeple of Old North Church on 4/18/1775 or US intelligence never found weapons of mass destruction in Iraq (umm, ok, scratch that one). So pardon Money McBags if he doesn’t give two shits about what you have to say, even if those shits are from a homeless AIDS patient with diarrhea and a massive anal fissure. Having you continue to rate debt is like if Ford re-hired the guy who designed the Edsel to produce a follow up called the Edsel Deuce or if Alan Greenspan were put back in charge at the Fed. The point is, even a blind microeconomist can see that the world economy might go to hell, so shut your fucking yaps and go crawl back in to the financial hole which you created. While Moody’s is rating credits, Senator Christopher Dodd is set to announce a tougher financial reform bill today. Unless that bill requires Moody’s and other credit rating agencies to put a disclaimer saying “We suck at our jobs” on every report they release, requires companies writing CDS to actually hold reserves on those CDS since, you know, they’re fucking insurance policies, and requires current and former Goldman Sachs executives to win popular elections before running the country, the reforms will simply be more government lip service (though if it’s lip service from Raven Alexis, then that is the kind of government action Money McBags can support). In other US macro news, industrial production rose .1% in February signaling a continued demand for computers and communications equipment. It doesn’t take a genius like Bill Gates or the guy who created the next great Olympic event (though NSFW) of muff guessing, to understand that technology is going to continue to grow and regardless of the global economy, people are going to continue to use it. Cell phones, computers, iPads, etc. are going to keep driving the way people interact with each other until we finally all just get chips put in to our brains (which is sometime in the next 30 years according to Ray Kurzweil) so being long technology even if this recession double dips is not the worst idea one has ever had (though it is slightly worse than taint tickling Tuesdays or the theory of general relativity).
In stock news, Phillips-Van Heusen acquired Tommy Hilfiger for $3B cash and stock as they apparently woke up thinking it was still 1991. PVH CEO, Ripped Off Van Winkle, said “Well we wanted to buy JAMZ and the company that makes those awesome Hammer Pants all the kids are wearing these days, but if we could only buy one of the three it was going to be Hilfiger. We just want to let people know that PVH is down with OPP.” Also, AIG is talking about cutting their previously announced bonuses by 30% in order to hopefully quiet controversy while still keeping the employees who almost caused a total global economic collapse. Whew. How would AIG ever operate without the people who fucking ruined it? In other news, LA county just retroactively gave Marcia Clark and Cristopher Darden bonuses for their handling of the OJ Simpson case while Tara Reid rehired her plastic surgeons. Siemens is shooting themselves in the face today by pulling the sale of their hearing aid unit. There is absolutely no reason you should care but Money McBags just wanted to see if he could type Siemens while keeping a straight face (and if you’re keeping score at home, he didn’t). Finally, WMT is up after a C analyst upgraded them to buy based on the potential for WMT to gain share from supermarkets and their pending world domination.
In small cap news today, FHCO is getting some national press as the city of Washington DC is handing out 500k of the new and improved FC2 which is not only cheaper to produce with higher margins, but it also tastes great. Money McBags wrote about FHCO about 2 months ago and all they have done since then is go up like a 45 year old virgin’s johnson after viewing this delightful NSFW shot of Money McBags favorite Alice Eve. The company has probably run a little too much but good things are still happening with a potential retail partner still out there and country specific AIDS programs just getting traction. Plus there is that little thing about AIDS not going away. In other small cap stocks, IBKR got downgraded today by KBW due to the ratio of actual to implied volatility in the options market showing no rebound and due to another little thing called “having no actual control over your business model revenue stream.” IBKR is both a market maker for options (though taking on no counterparty risk) and provider of a trading platform for day traders. The problem they have been running in to is that the options market requires them to hedge the volatility and when the actual vol differs greatly from the implied vol, they can find themselves in a situation where they don’t make any money as their margins get thinner than John Edwards’ excuses. Their CEO claims they have $2 in annual earnings power and over a long time horizon their earnings should be smoother than Olivia Munn after a cocoa butter bath, but that long time time horizon may be 100 years at this rate. The fact is they have lumpy quarters and less ability to control the lumpiness than Michael Jackson has the abilty to moonwalk ever again. So if you believe over the long run that those quarters will even out and there really is $2 of earnings potential, buying this stock at 8x those earnings on a down day due to a downgrade is not a terrible entry point. That said, value investors have loved this stock all the way down from $35 and it’s one of the few companies not to have participated in the rally.
1/19/10 Midday Report: Citigroup? More like Shitigroup (and yes, i’ll be here all week so don’t forget to tip the waitstaff)
The market is rising on news of Citigroup putting up another quarter so bad that even Dan Brown refused to write the press release (and that is seriously bad since that guy was more than happy to put his name on a shitstain like the DaVinci Code. And not to ruin the book for you, but the mystery goes unsolved at the end as no one can figure out how such a crappy book sold so many copies). While C’s quarter was inline with analyst estimates, they still put up a loss of $.33 per share or if you want to forget about them paying back the government, it was a loss of $.06 per share. Of course forgetting about the money they received from the government and subsequently paid back would be like forgetting Roman Polanski’s past indiscretions and inviting him over to baby sit for your 13 year old daughter or forgetting about the current global economic cirsis and re-hiring Alan Greenspan as Chairman of the Fed. The good news from C’s Q was that their loan-loss provisions were down 36% from the prior year (though still $8.2B) and 10% from the prior quarter and net credit losses fell to $7.1 billion sequentially from $7.9 billion. So things are getting mildly better in the same way that an increased T-Cell count is mildly better for AIDS patients (newsflash, you still have AIDS). The surprising thing to Money McBags was that C’s NIM was down 30bps. How does this make sense? Spreads are the widest they have been in history so either C doesn’t quite get the whole lending for more than your cost of capital thing (and as evidenced by the last 5 years at C, it is quite possible) or they are reserving so much for future fuck-ups that they are not able to fully utilize their capital base. Either way you spin it, C’s lending business still has yet to shake off the Charles Prince/Sallie Krawcheck ass rapingly bad mismanagement it went through and their current CEO, Vikram Pandit, who had no financial services operating experience before taking over C still seems to be wondering at how ATMs work (“wait, is there a midget in there who gives me my cash? I don’t get it. Can we go over this again?”). So the market was down last week on INTC’s blow out Q and is up today on C’s ass out Q, makes perfect sense.
There is not much macro news today except for the UK reporting that inflation had a record jump to 2.9%. People, let’s not take our eye off the ball here (especially if you are Carrie Prejean and we’re talking about my balls, and just remember, if Jebus were against hummers, he never would have created mouths). Inflation can’t be overlooked. Sure the record jump in UK inflation was driven to some degree by oil prices, but remember, there is more stimulus in the current financial system than in a truck filled with Viagra, cans of Jolt Cola, and copies of old Bridget Bardot pictures. Rates are likely going to have to rise to stem the oncoming inflation, so be prepared and hope Bernanke isn’t late to respond like the dissenters at Tiger Wood’s wedding. Also, beware that the P/E ratio for the S&P has now risen to greater than 20x so earnings either have to start beating expectations, or the market needs to calm down.
In other stock news today, Kraft finally bought Cadbury and as long as they don’t fuck with those delicious Cadbury Creme Eggs (like putting caramel filling in them, and seriously, whose idiotic idea was that? I mean why not just draw a mustache on the Mona Lisa or let John Meriwether consult on your hedge fund), then Money McBags could give a shit.
In small cap news, a bizarre little company which Money McBags has followed for a while yet does not own, FHCO, announced a $.05 quarterly dividend and reaffirmed their operating earnings guidance of 35%-40% growth for fiscal 2010. FHCO of course stands for the Female Health Company and they are the producers of the Female Condom, which is their one and only product and unfortunately does not come in flavors for all you cunning linguists out there. They derive their revenue largely from sales to NGOs (mostly USAID) who then distribute the female condom in AIDS ridden areas like Zimbabwe, South Africa, and Paris Hilton’s panties. Here’s the thing about this company though, they are the only FDA approved producers of the female condom so they get all of the business (about 35MM sold per year) and while the male condom is cheaper and more commercially available and used, the female condom is just as effective and a terrific option for protection for ladies in third world countries where men love unprotected sex like Joanie loved Chachi and where AIDS is spreading more rapidly than that stupid “Pants on the Ground” video (and you know what, if you put your pants on the ground one more time, Money McBags is going to put his foot in your ass, so shut the fuck up with that crap already). Also, despite the global economic crisis, governments are still earmarking money for AIDS treatment and prevention to the tune of more than $50B between the US’s Pepfar initiative and the British government’s $11B pledge. So there is a huge market, FHCO is the only player, funding is not going away, and oh yeah, people love fucking, so demand isn’t going anywhere. The biggest news though is that the second generation female condom recently got FDA aproval and those can be sold at a cheaper price and with greater margins to the company. The company had ~$6MM of operating earnings last year (and remember most of those sales were from the worse margin FC1) and as mentioned earlier is forecasting 35% to 40% growth in that so they could potentially see $8.5MM in operating earnings for 2010 or roughly $.35 per share. With today’s jump they are now trading at around 15x that $.35 number and with the $.20 annual dividend, they are at a roughly 4% yield. Oh yeah, they have $12MM in Federal NOLS and $19MM in foreign NOLS so they are not going to pay taxes until around the same time Bernie Madoff is up for parole. There are a number of things to worry about with FHCO: It is a tiny company, the board of directors are almost all over 60 years old (seriously, check it out, their board reads like a casting call for Cocoon, led by a 76 year old CEO/Chairman/President.), there is no sell side coverage, it is thinly traded, the company has been around for years and is just reaching critical mass, and it relies on government funding. That said, there is upside as they are looking into partners to promote the female condom in US retail chain stores now that FC2 has been approved by the FDA and thus the costs have come down enough to allow for marketing spend (there are trial runs now in CVS and Walgreens stores in select areas). Plus AIDS isn’t going anywhere and the female condom is reaching an infleciton point in many countries where usage is starting to grow. The company is obviously up on a spike today, but it has an interesting little story and isn’t too expensive, so it is worth all of you digging a bit deeper and it is one product where I highly recommend first hand research.