Posts tagged Financial Reform
5/24/10 Midafternoon Report: American xenophobes shout “I told you so!” as european fears send US markets tumbling
Stocks were mostly flat today like they had no gaussian curvature or had Heidi Montag‘s singing voice until they took a nosedive over the final 30 minutes of trading. Existing home sales in the US rose by 7.6% and bested analyst guesses thanks to the first time home buyers tax credit, foreclosure auctions, and promises by Sabrina Soto to intervene with buyers’ real estate and show them where to properly lay their pipes. While home sales were up, prices also rose 4% with the median home price now $173k, or three times the cost of Detroit. Treasuries continued to gain in this uncertain market as investors sell out of their equity holdings and seek safety in bonds, even if those bonds are issued by a country whose debt is 2/3 of their GDP and a country who somehow thought naming a town Bumpass was a bright idea. In other US news, the financial services industry is still trying to figure out how they will be affected by the financial reform bill which was recently passed by the Senate thanks to a collective dose of extracorporeal shock wave lithotripsy. Many analysts think the bill will reduce profits but leave industry size and power intact, which is basically like castrating Lexington Steele. While profits could be cut by 20%, financial service companies will no doubt find new ways to exploit loopholes and the cornholes of average workers in order to extract maximum profits for doing nothing other than hitting buttons and passing paper. Fear not though, Money McBags has a solution for America’s impending debt problem that doesn’t involve Faye Reagan offering to service said debt. In an auction this weekend, the first US silver dollar which was minted in 1794 sold for $7.5MM. So all we need Bernanke to do is just mint a fuckload more silver dollars and fudge the dates on them. Problem solved
In international news, the Bank of Spain bailed out a regional bank named Cajasur which of course is Spanish for “We suck at lending.” The bank is apparently largely controlled by the Catholic church whose strategy was to make up for losses by turning water into wine, unfortunately, they were less successful at that than Martin Luther was at keeping his complaints succinct (seriously, 95 fucking theses? I mean we know the benches were too hard and chapped your ass cheeks, but couldn’t you have left that one out and just made it 94?). This marks the second time since 2009 that a regional bank has been bailed out by Spain and the also the second time since 2009 the Bank of Spain has put in longer than a two hour work day. In other international news, Britain announced 6B euro in spending cuts. They hope these cuts work out better than their spending cuts of 1932 which took dental care off of public health plans. Among the cuts in the legislation are tighter restrictions on first class travel by public employees, advertising cuts for public projects, and less material to be used for the uniforms of the national soccer team.
In stock news, C was upgraded by Goldman Sachs to buy, most likely due to a typo or Goldman trying to pump C shares so GS’s majority partner, the US government, can dump them. C remains more full of shit than someone with Prader-Willi Syndrome and no anus. The company is too big not to fail and has seen a talent drain similar to the third season of Flavor of Love. Goldman analysts were busy today though as they also raised Sprint to a buy sending the stock up nearly 10%. The reason for the upgrade was a potential lower churn as Sprint has likely already lost every customer they are going to lose. Also, savings and loans banks reported their highest profit since 2007 when they were actively taking careless risks by lending money to people who couldn’t afford to pay for haircuts, much less pay loans back. Of course not even Thrift banks can screw up getting free money and lending it for more than free with the government ready to bail them out should anything go wrong (well, that is all Thrift banks except for maybe IndyMac). Thus record profits aren’t really anything to applaud as it is like applauding a hefty stripper in a Reno gentleman’s club for convincing a patron to pay for a lap dance (and for those of you who have never been to a Reno strip club, they’re all fucking hefty).
In small cap news, JOEZ was somehow up 8% despite small cap stocks being tossed off like a 21 year old virgin’s wanker while guess 1629′s NSFW muff. Money McBags broke JOEZ down after their last Q and thinks they could earn between $.10 and $.15 per share in 2011 whic means the stock is now trading at 13x to 20x that but the concern is obviously that with Europe going to 0, people may not have money to spend and thus JOEZ’s growth may slow. While their jeans sales aren’t directly related to Europe, the global economy is and the last time Money McBags checked, the US was part of the global economy. Given the current market fear and dislocation, Money McBags has no interest in stepping in to JOEZ here, even if he’d be stepping in to the overpriced and stylish Outsider, but he is keeping abreast of the stock (though he wishes he were keeping stock of Brooklyn Decker‘s breasts instead). In other small cap news, WGO continues their drop to $7.50 as high beta shit companies that rose for no reason are now becoming less in vogue than banana hammocks and Keynesian economics. Money McBags has said this before but WGO is not going to make money this year and next year will be lucky to earn $.50 per share much less $1.20 and it is trading at 10x $1.20. As long as the market continues to sink like all of Money McBags’ hopes and dreams, WGO should be more than a big short (as opposed to these small shorts). Finally, Money McBags dumped his DFZ today. He loves the company and thinks they earn around $1.05 pretty easily next fiscal year with an accretive acquisition on the way. That said, the stock is less liquid than a hefty corn shit and with the market structure broken, Money McBags doesn’t want to get caught holding anything with no way to get out. So he took his 25% profit and went home.
The markets were relatively flat today despite the financial sector reaching down for its cankles as the Senate prepares to probe the sectors’ cavernous derivatives loophole. Financial reform is coming, the only question is if it will be weak or really weak but until then financials should be a bit volatile with a downward bias. While it is likely any Senate bill will be more toothless than Amy Winehouse after downing a box of pixie sticks, smoking a case Stallion cigarettes, and getting punched in the fucking mouth, the markets hate uncertainty like Ron Paul hates the Fed, Hemingway hates adjectives, and females hate giving blumpkins. That said, the US Treasury is apparently going to start dumping their shares of C before C once again becomes too big and fails. At current prices the government stands to make $11B which should be enough to finally get new drapes in the Lincoln Bedroom, something other than Natty Light in the White House fridge, and enough tech support to clean all of the SEC computers of porn. C is trading down 4% on the news but is still above book value and still above zero so it’s too early for Money McBags to buy.
Internationally, Greek bonds are still plunging lower than necklines at the AVN awards or on German Chancellor Angela Merkel at the Lolas. Merkel is out shouting “nein” to the Greek bailout until Greece shows a “sustainable and credible” plan for fiscal responsibility as opposed to their current plan which involves stealing underwear and then somehow profiting. Germany keeps hedging on their support for Greece and nothing German has been this indecisive since Aschenbach eyed little Tadzio for days on a beach in Venice. But it’s no longer just Greece that has the EU’s panties all in a bunch as CDS in Portugal have hit record highs. Portuguese Foreign Minister Luis Amado said “We are not in such a critical situation as Greece. We didn’t cheat with our statistics” he then went on to say “that’s right, we fucked up the old fashioned way, we earned it.” It looks like JFK’s old Domino Theory in foreign policy may finally be coming to fruition but instead of the spread of communism, bankruptcy is spreading from one country to the next.
In stock news Catepillar put up a nice quarter which would likely have sent noted lepidopterist Vladmir Nabokov into a tizzy. Revenue fell but the company earned a profit and raised 2010 guidance as they were able to metamorphosize their operations to a leaner cost structure. Guidance for 2010 was raised from $2.50 per share to $2.50 to $3.25 per share as the company cited rebounding mining and construction especially in China and Heidi Montag’s pants. Whirlpool also put up a ginormous quarter and is up 10%+ as the emerging middle classes in China and Latin America drove appliance sales. The company earned $2.51 per share demolishing analyst guesses of $1.33 per share and they raised their full year guidance to 4% to 6% growth and eps to $8.00 to $8.50 from $6.50 to $7.00. Interestingly, what helped drive sales in the US was people ordering refrigerators in order to use the boxes as shelters once their homes were foreclosed upon. Finally GOOG is down today after some research showed their market share dropped in China and after they dropped Verizon as the provider of wireless access for their Nexus One phone. GOOG is now dropping to Money McBags “add fucking more price” as the company is getting very cheap for an entity that is dominating the world like Rasputin dominated young Russian lasses in the early 1900s. Money McBags is going to wait for the stock to settle but will likely be adding more in the next few days.
In small cap stocks, TMRK raised $50MM through 12% senior secured notes which is actually pretty big for the company. Money McBags has talked about this stock quite a bit but has continued to hold out as he was pretty sure they were going to have to raise capital in the next year and wasn’t sure what their plan was to do so. Well now we know and the stock is up 4% on the news. They are in a terrific growth area as cloud computing is as certain as death, taxes, and Heather Vandeven being hot. TMRK is trading at ~9x 2011 EV/EBITDA and ~15x Money McBags’ 2011 eps estimate so it’s not wicked cheap but it is more reasonably priced than dignity in reality TV or a date with Jessica Pare.