Posts tagged IBKR
The market was quiet in the morning despite a slew of solid earnings announcements as it waited for the release of the Europe bank stress tests which were more highly anticipated than Lindsay Lohan’s jail stint, Avatar’s opening weekend, or Mel Gibson’s next career limiting phone call. Well the results came out midday and were exactly as worthless as one could have hoped. Only 7 out of 91 banks failed the stress test including Munich based Hypo Real Estate, Greek based ATE Bank (which apparently “ate” a fuckload of bad loans), some Spanish banks, and Italy’s Bank of Madoffia. Of course these stress tests were weaker than the efficient market hypothesis in the era of high frequency traders or Haiti’s infrastructure, so it’s hard to get too excited about the results.
The stress tests failed to analyze whether banks could withstand a debt default by any European country and neglected to look at the entirety of banks’ balance sheets (which is a bit like asking a female out on date but forgetting to check for an Adam’s Apple) including completely leaving out any government bonds being held to maturity which is only the fucking majority of the sovereign debt held, so that makes as much sense as trying to diagnose rectal cancer with a broken thermometer and a loving touch.
From day one it was obvious that the stress tests were more bogus than Iraq having weapons of mass destruction, MBA programs teaching anything useful, or Ricky Martin being interested in any female who bangs. There was no way the EU was going to have the test results come out and show that a fucklaod of banks had failed and yet they also wanted to try to have some credibility and not have every bank pass because that would have been less believable than the US bank stress tests or GS’ non-admission of guilt in the Abacus CDO manipulations. So the Committee of European Banking Supervisors managed to find some BS Goldilocks scenario where 7 banks would fail in a number deemed to be just right in not causing more fear but also just right in showing that there are some problems. So jolly good show, hope no one in the CEBS tore their black jeans in their rigorous assessment of the data.
The point is, the banks may be healthy or they may not be healthy, but don’t piss on Money McBags and tell him that it’s raining (unless you are Kelly Brook and just downed a case 1787 Chateau Lafite, and in that case, piss away) by claiming the tests that were run give any kind of conclusive evidence about the health of the EU’s banking system. So excuse Money McBags while he yawns this one out while the market rallies on the news.
In other european news, Britain had a 1.1% increase in GDP which was double what economists had guessed but is still nowhere near pre-recession levels. The country hopes their newly introduced dental sector can help spur GDP higher. In Germany, business confidence rose the most since reunification and to its highest level in three years as the whole country celebrates schadenfreude at the downfall of their fellow EU members. Finally, Hungary’s credit rating may be falling to junk after their talks with the IMF went worse than Sarah Palin‘s talks with Bristol about abstinence. A lower credit rating could leave investors in Hungary starving and will cause it to be more difficult for the country to raise money which it won’t likely to be able to pay back anyway. That said, the threat of credit ratings downgrades are coming from S&P and Moody’s who, as always, suck at their jobs worse than a closterphobic magician’s assistant, so take it for what it is worth.
And in China, worries are getting out that banks may not be able to collect on nearly a quarter of the loans they made to local governments for the building of airports, highways, and lunch delivery of the nation’s favorite soup, cream of Sum Yung Gai. Banking regulators haven’t addressed this potential shortfall but Money McBags is sure they will successfully manipulate their way out of it.
In market news, earnings are powering US companies like spinach powers Popeye or herpes powers Britney Spears (she does run on herpes, right? It’s the only logical conclusion with which Money McBags can come up for regarding the affair du Federline). Ford reported a profit again and said they expect next year to be even better thanks to their new vibrating seats functionality. The company was strongly cash flow positive with $2.6B of cash brought in and they say they will be in a net cash position by the end of next year (and net cash is Money McBags’ third favorite position, right behind lowering taxes and reverse cowboy). Ford’s sales were up 28% in the first half which is twice the industry average as consumers move down market and no longer care about status.
In other earnings news, MCD beat estimates yet traded down as it missed whatever the whisper number analysts made up but were to chickenshit to actually put on paper was. Money McBags will never understand the concept of a whisper number (unless it is Olivia Munn whispering Money McBags her number) because it is a bigger cop out than “it got lost in the mail,” “I was young at the time,” or running to Miami to play with Dwyane Wade. In theory, sell side analysts get paid to provide their unbiased opinions while in practice they get paid to pump up the stocks for whom their firms are trying to raise money, to write meaningless daily updates, and to anally rape sheep (ok, one of those may be made up) and the lameness of not having the nuts to put a whisper number in any of their daily drivel says all one needs to know about paid research. Anyway, MCD had a nice quarter with revenue up 5%, same store growth of 4.8%, $1.13 eps, and only 1k blocked coronary arteries in the Q. Strong international growth helped fuel the results as MCD’s cheap menu and and aspirational brand equity resonantes in countries with large poor populations such as India, China, and the United States.
Also, MSFT put up a big Q after running up yesterday in anticipation of good things happening like the resurgence of the corporate upgrade cycle, stronger sales of Windows, and Excel hardcoating goalseek to always find the lovely Sofia Vergara. EPS was up 48% to $.51 and revenue grew from $13B to $15B, both numbers handily beating analyst guesses though the numbers could contain a trojan horse virus so no one wants to get close enough to them to really dig in.
Finally, Verizon slapped their cocks on the table and yelled “can you hear me now?” as they beat guesses by $.02 per share by earning $.58 per share despite flatish revenue growth and no exposure to the iPhone thanks to better operation. And AXP beat estimates and tripled their profts as customer spend was up 16% and like all financial companies, they lowereed their provisioning, likely just in time to have to raise it again for the second dip in the upcoming recession.
Not all was lobster tails and blow jobs though as AMZN missed their earnings estimates despite growing the top and bottom lines by 40%+. Analysts had guessed the company would earn $.54 per share but instead they earned $.45 per share due to an increase in operating expenses as the company has to spend more on advertising to convince people that the Kindle wasn’t outdated two months ago with the release of the iPad or ~600 years ago with the release of the printing press. Amazon has always seemed like a nebulous investment to Money McBags given the competition, relatively low barriers to entry for specialty sites, and consistently high valuation so he is as happy to not be involved in this stock as Dan Quayle is happy not to be involved in a spelling bee (and yes, Money McBags just whipped out a 20 year old punch line because frankly, 1k-1.5k words of dick jokes a day is a blistering pace, even for a talent like Money McBags).
In small cap news, IBKR reported and managed to shit all over themselves, and Money McBags’ thesis, as if they didn’t just have Montezuma’s Revenge but had his ire, hatred, and angst as well. Their results made Money McBags sadder than he was this morning when read that the inventor of the black box had died until he realized it was this guy and not Roxy Reynolds or Vanessa Del Rio‘s mom.
Anyway, before we get to IBKR’s numbers, Money McBags wants to apologize for saying buying some options in this piece of shit company ahead of earnings would be a good strategy. He believes his logic was sound, but unfortunately he made the mistake of believing he had correctly called the bottom of one of the biggest value traps the market has seen since AIG in 2006 or Elizabeth Berkley‘s acting career pre-Showgirls, so he is sorry for that. Never again will he give a fuck about this shitty company whose market making business which is based on voaltility couldn’t profit when the market was, umm, how to put this lightly, fucking volatile.
IBKR earned $.09 per share in the Q which was down from $.31 per share in last year’s Q and continued the unpredictable nature of this company whose quarters are more up and down than Oprah’s weight (see, Money McBags could write for Leno, no problem) or Faye Reagan on a sybian (he could also write for the AVN awards, he is bi-comedial). Their internet brokerage business fared well and continued to grow increasing accounts by 20% and customer equity by 43% but all of that was irrelevant because their market making business made a mockery of themselves and only had a 5% pre-tax profit margins leading to a profit of $3.9MM which was down 97% from last year.
The stock is such a peice of shit that their CEO who is an ~80% owner has given up trying to make it seem like anything someone would want to invest in and is instead now marketing the stock as some type of hedge for anyone who wants to keep their portfolio from growing too much.
The CEO said: “increasing fluctuations in foreign exchange markets have a corresponding impact on our reported results in U.S. dollars. This makes it ever more apparent that our shares would be more appropriately considered as an investment in a global enterprise based in a diversified basket of currencies rather than in U.S. dollars.”
So any of you out there who own a global enterpirse, buy away.
On the call, CEO Peterffy claimed that the appreciation of the dollar cost them $72MM in revenue or $.16 per share because it’s always one excuse or another. Anyway, Money McBags clearly fucked up and was speculating on market volatility causing earnings to appreciate, which apparently they would have had the dollar not strengthened, but whatever. As Money McBags was speculating, he said to buy options and not the stock so your losses would be minimized, but either way, fuck this company and if any of you ever read Money McBags trying to give an opinion on IBKR other than he has no idea and they hate turning out a profit, you have permission to punch Money McBags in the nuts while forcing him to listen to the melodic stylings of Celine Dion.
7/19/10 Midevening Report: Stocks higher as earnings more highly anticipated than the last thing that wound up disappointing everyone
The market sagged today like a droopy catenary with a very low value of “a” or Uma Thurman on vacation, before gaining some steam in the afternoon. With earnings season started, macro data was lighter than Ben Stein’s reputation as an economist or sales of Liberace’s last book: “How not to get AIDS and die.” Homebuilder confidence dropped to it’s lowest level in over a year as The National Association of Home Builder’s index slipped to 14, with readings lower than 50 meaning more respondents said conditions were poor, and readings lower than 20 meaning we’re completely fucked. At blame for the drop was the governement tax credit running out, foreclosures continuing to increase, and pessimism proving to be higher than if Arthur Schopenhauer were trying to sell a mansion in Detroit at full price.
Alternatively, some made up organization called the National Association for Business Economics (and Money McBags would love to see the charts and graphs they pull out of their asses) said hiring picked up in the economy with 31% of businesses increasing payrolls while only 14% decreased payrolls. What they negelcted to say is that of the 82 businesses which they survey, 31% are in the reposession business and 55% are fictitious.
Internationally, Moody’s cut their ratings on Ireland from a little drunk to fucking sloshed as a result of a weakening banking system, increasing deficits, and way to much puke still littering the streets from St. Patrick’s day. The downgrade was a full notch lower to Aa2 which as always means absolutely nothing to Money McBags since he knows Moody’s is more fraudulent than a Lou Pearlmen business venture or Jamie Lee Curtis’s vagina and he has no idea what the difference is between Aa2, Aa1, and Baa other than that two of them are ridiculous and one of them is the noise Roseanne Barr makes when taking it from behind.
Now look, Money McBags is no Donnie Deutsch (and not just because he has no idea who Donny Deutsch actually is, but also because he’s not completely full of shit), but it doesn’t take a marketing guru to understand that if you are selling something, those buying it should assume it works and also understand what the fuck it is they are buying. Since Moody’s obviously has failed step 1, they can at least have their ratings be understandable. Thus if Money McBags were in charge of Moody’s, the first thing he would do is fire everyone, the second thing he would do is hire Ines Sainz as his personal assistant (actually, he would do that first and fire everyone second, but whatever), and the third thing he would do is get rid of the stupid rating system and only have three categories companies could fall in to: No Problems, Shit is getting a bit scary, and Stay the Fuck Away.
And it’s not just Ireland in the international news today, but Hungary is starving for attention as the government refused further austerity measures which caused the IMF and the EU to get their panties all in a bunch (which wouldn’t be a problem if the IMF were Sofia Vergara and the EU were Jessica Biel). The government’s stance has apparently called off offers of further aid for the country from the EU/IMF which has led to yields on Hungarian bonds to shoot up like Chris Farley after reading a review of Beverly Hills Ninja.
In stock news, after being swallowed by Nokia and spit out as a JV, Siemens* is sticking to a deal to purchase a Motorola unit that makes telecommunications equipment. The company hopes that upgrading their equipment will help the company grow and thus lead to a stronger, and perhaps better aimed and placed, Siemens’ strategy. Also, Apple continues to fall despite saying they will give iPhone 4 users a free case to correct the call dropping problem that happens when holding the phone with a bare hand (also known as phonetile dysfunction). In order to plug the gap in the antenna, the case comes with plenty of lube and a lifetime supply of viagra.
In small cap news, JOEZ sold off again today and remains either cheap or expensive depending on if you think management can go against previous performance and figure out how to turn growing revenue in to something called profits. One company that Money McBags would like to highlight is IBKR which has earnings later this week. Money McBags has talked about IBKR a few times on this blog (just throw it into the search function) and has consistently brought up the statement from their CEO, who owns 80% of the stock, that the company has $2 of annual earnings power, which it earned in 2008.
The problem is that this company has been more of a value trap than Alyssa Milano‘s crotch and it has done nothing but go down since it went public in 2007. The company has two basic businesses, they are a market maker for listed options and they have an online brokerage. In the market making business, they take no counter party risk and in times of volatility also take no profits as when volatility is low, the bid/ask spread gets compressed with competition increasing. This kills margins in that business worse than cheating on your cancer stricken wife, having a baby with the person you are cheating with, and then claiming the baby is not yours, kills a political career. Margins in the market making business dropped to 7% last Q thanks to actual volatility coming in lower than implied volatility which hurts them since they are long volatility like Lexington Steele is long dongability. So net income in the segment dropped from $118MM to $5MM which is a bigger drop than Mel Gibson’s popularity after a few late night booty calls to his wife.
IBKR’s other business is an online brokerage unit for daytraders that has had strong growth. The business continues to grow accounts by 25%+ and grew net income from $45MM to $65MM last Q. That said, no one really gives a fuck about this business yet because it doesn’t drive the business.
Anyway, the reason Money McBags thinks this is an interesting company right now is that volatilty in the last Q has been spiking like KaKa‘s popularity in Brazil, and last year when volatility was this high, the company earned $.30 per share. Check out the chart of the VIX below which Money McBags is using as a volatility proxy:
So look, Money McBags has no idea how to forecast this Q for IBKR since their quarters are lumpier than Dolly Parton lying on her back but the business is set up to perform well in volatile times and their earnings in theory should smooth out over the long run (which as Money McBags said in an earlier post, may be eons).
That said, they have proved that they can earn $2 per share and if they can achieve that again, they are trading at 8.5x that which is hella fucking cheap for their growth. Plus, since the economy is teetering on the brink of shitting its pants for the second time, volatility should only increase in the long run and thus IBKR should start to grow their earnings power. Anyway, if ever IBKR were going to put up a good q again, this should be it, so buying a few short term call options may not be the worst idea here. Though to be fair, Money McBags has yet to meet a value investor who has not angrily urinated on their tattered copy of Securities Analysis while cursing Benjamin Graham’s margin of safety after investing in IBKR, so buyer beware.
*Money McBags knows it was Siemens Networks and not Siemens, but sometimes we must sacrifice for the joke.
Oh shit, the market sunk today like Bernie Madoff’s grandchildren’s hopes and dreams or like a booze cruise captained by Joseph Hazelwood. Just when you thought investors had forgotten about Greece like John Edwards forgot about dignity (though perhaps he never had any) or Britney Spears forgot about underwear, it is back in the news bringing down the Euro. Fears remain that Greece won’t be able to service its debt (and it won’t, unless perhaps Julia Alexandratou does the servicing), that the Euro may be doomed (is everyone else riding out EUO with Money McBags?), and that Nia Vardalos will finally make a sequel to My Big Fat Greek Wedding. Making matters worse are that Sony warned that they may suffer a “significant impact” if Europe’s deficit spreads, Chinese Premier Wen Jiabao said the foundations for a worldwide recovery aren’t “solid” thanks to the continuing debt crisis and the foundations being made out of tofu (and not extra firm tofu, but the regular mushy shit) and paper (the paper of course being the dying Euro), and Hannah Hilton still remains “retired.” Things are looking so bleak today that even the cheering of Alison Preston likely won’t cure the markets (though Money McBags would still like to put his rah in her sis-boom-bah). One way to stop the debt contagion from spreading is to go all Weimar Republic and inflate the shit out of the Euro, another is to break up the EU and stop rewarding moral hazard which seems to be at what Gremany is now hinting. Breaking up the EU would not only allow Germany and its strong economy to avoid taxing its workers in order to save its freespending neighbors, but it would also allow Germans to practice their favorite past time of schadenfreude. It is scary out there today so take a deep breath and start booking your vacation to Paris because the Louvre is getting cheaper by the day.
In the US, the banking sector is taken a beating like it’s 1986 and it just walked up to Mike Tyson and told him he talks like girl. Politicians finally seem to want to try to regulate the industry that gave poor people loans in order to sell those loans off to greedy rich people not paying attention and thus destroy the global economy. First off, credit card companies are taking it in the first bucket today (that was for all you credit card analysts out there) as the Senate voted on legislation to limit interchange fees. AXP, COF, MA, and V are all down 5% to 10% as a key source of their revenue appears to be drying up like Soul Glo-less jheri curls. Not only are politicians going after card issuers, but they are trying to fix the rating agencies by creating a middleman (or lucky pierre if you will) to determine who will rate bonds. This is a bassackward solution, but still better than having rating agencies bid for business and thus completely take objectivity out of just a little something called objectively rating fucking bonds. First of all, Money McBags doesn’t know why any bonds need third party ratings. Investors should just do their fucking work themselves or rely on the sellside or fucking Yelp.com for all Money McBags cares. Most importantly though, the current system is more screwed up than Oedipus’ sex life or Tori Spellings‘ face, so Money McBags applauds the baby fucking steps politicians are taking but it’s a bit like showering before you bone a hooker because at the end of the day you’re still going to get herpes. Finally, the SEC and NYAG are still going after banks who may have lied to ratings agencies about what they were actually putting in CDOs. Look, Money McBags has said this before, but they were all fucking complicit. Honestly, it would take about 3 minutes going through e-mails to convict every bank and every ratings agency of screwing the consumer like the consumer was walking home and hitched a ride on the the Bang Bus. It was a big shell game only the shell was the global economy and the game was gay chicken and no one flinched so we’re all left with flacid cock in our hands. Be very wary of the financials space right now because if the government wants to be serious and prosecute, there will be no winners, like a Wilford Brimley-Kathy Bates sex tape.
As for macro news, US consumer sentiment was up in May and inline with analyst guesses as the average US consumer can’t find Canada on a map, much less Greece, so it just proves that ignorance, and Madelyn Marie, are truly bliss. Also retail sales rose by .4% which beat analyst guesses of .2%. However, if autos, gas, and building materials are excluded, retail sales dropped .2%. Up .4%, down .2%, whatever, it’s all rounding to Money McBags, but the point is, and Money McBags has to put this extrememly elegantly because he expects his readers all to be very cunning linguists, shit is still fucked up.
In stock news, it was what Money McBags calls an AC Green or a celibate day as shorts were up and longs were down. In addition to credit card issuers having their balances transfered, chipmaker Nvidia put up a big quarter but was down on a forecast more lacking than diction on an NBA studio show. The stock was down 10%+ as they guided to a 3% to 5% revenue decline for the upcoming quarter and analysts were guessing flat to moderately up revenue growth. Videogame makers are also all getting hit as an industry tracker showed the worst year over year sales decline since the Mario Brothers were implicated in the steroid ring and thus became a bit less “super.” Software sales were down 23% and analysts were expected sales to rise, especially off of a week April number last year while hardware sales were down and amazing 37% as teenagers spent more time playing Scrabble on Facebook and learning to YoYo from the way ahead of his time K-Strass.
In small cap news, everything tumbled except sleepy Money McBags holding DFZ and IBKR. IBKR is a bit of an interesting play here as the CEO (who also owns 80% of the company) thinks there is $2 of eanrings power in his business but they face lumpy Qs as their market making business is always long volatility to hedge. Well guess what, unless you have been on the planet Melmac for the past week eating pussy, you are probably aware that volatility is spiking up and thus IBKR’s long vol play should bring earnings back to their market making business. The company takes little balance sheet risk as they are making markets in listed options and hedging their exposures and they have a nice other business which is an online trading platform that is growing 20%+. This business has been more of a value trap than going to the backroom in a Vegas strip club (and as a word of advice, save the $150 and just get 7 lap dances), but this is the kind of environment where they should excel. So if you are itching for risk, this is one way to play the financials space relatively safely and with the trends going in your favor and it’s still pretty cheap trading at only ~8.5x their earnings potential.
The market is down a bit today on news that some country in Europe named Portugal has had their debt rating lowered by a whole minus sign (yikes, imagine if it had been a minus sign and a frowny face) and slightly negative US macro news. New home sales came out today and boy were existing home sales surprised by that, though it does explain why their come-ons were never returned and why new homes have so many closets. Sales in february fell to a record low partially due to blizzards and partially due to people not having any fucking jobs. Puchases were down 2.2% and were projected to moderately increase, so once again, nice job economists, don’t let the assumed door hit you on the way out. In other macro news, US durable good orders rose by .5%, but less than expected by economists. However, exlcuding aircraft, military orders, and wrecking balls to demolish foreclosed upon houses, durable goods were down .6%. Once again the economy is putting out marginally good data followed by marginally bad data and thus remaining at more of a stand still than a value destruction debate between John Meriwether and Bernie Madoff. It’s good that we appear to be at a new equilibrium, though it’s bad that that equilibrium appears to be stagnant growth and no dessert after dinner.
In international news, Japan passed a $1T budget to stimulate growth while hoping to avoid fiscal hari kari as their debt is twice the size of their economy. As part of the legislation, the government is trying to create more jobs by building more pachinko centers (they are now required to have three on every block instead of just two), hiring Mr. Miyagi to help train youngsters on how to paint fences, and by requiring 10 “shooters” in all future bukakke films as opposed to the usual 5. In Europe, Portugal was downgraded by Fitch ratings from a country to I guess a principality. Their debt moved from AA to AA- and we all know how drastic that – is from Fitch ratings, in fact Money McBags has nightmares about getting a – from Fitch like he has nightmares about losing his Michelin Star or about waking up next to Lady Gaga with the Ellen Degeneres show blasting on his TV. So now we’re going from Greece to Portugal, with their tasty sweet bread, their delicious salt cod, and their lovely export Vanessa Marcil. Look, what Money McBags knows about Portugal can fit into an empty bottle of Taylor Fladgate or a small Portuguese hot plate, in fact, though he is a world traveler, Money McBags has never actually been to Portugal or it’s capital Lisbon (though he hopes to find it’s mythical sister city of Lesbian one day), but he does know that Fitch ratings are about as relevant as the Know-Nothing party, the steady state theory of the universe, or Robert Guillaume, so who cares.
Starbucks announced a $.10 cent dividend which will allow shareholders to finally have something to drop in to the tip jars when ordering their grande mocachino lattofcrape. Dick Bove is out today saying bank stocks may quadruple by 2012 due to reduced loan losses and new math (where quadruple means something at least four times less than it does now). Of course this is the same Dick who raised Lehman Brothers to a buy 3 weeks before their bankruptcy so either that was a glaring typo or nobody should give a fuck what Mr. Bove guesses. Also, MF Global is rallying on news that John Corzine, the former head of Goldman Sachs and New Jersey governor will be taking over as CEO. MF board members are hoping Corzine can bring the kind of profitability to MF Global that he brought to Trenton, Newark, and every other near bankrupt place in New Jersey. More importantly, his Goldman background will now assure MF of a government bail out should they ever experience another rogue trader.
In small cap news RICK continues to get hammered after hitting Money McBags’ $16 sell point several weeks ago. Unfortunately Money McBags did not not sell and for the first time in his life he is regretting a decision involving Rick’s Cabaret that didn’t center around leaving or not getting another dance. There was a lot of momentum in the stock and their quarter was pretty awful on top of a questionable acquisition, so the sell off is not unwarranted. Money McBags will likely lock in his gains and buy back later when the stock settles back down. Also, long time value trap IBKR was downgraded to underperform by Zack’s, though luckily for IBKR Slater and Screech still have them at Market Perform (while Money McBags has Kelly Kapowski at a Strong Buy). Their downgrade was based on lower options trading volumes in the next few quarters and the recent piss poor performance. IBKR’s CEO still maintains that the company has $2 of annual earnings power if you smooth out their performance over the long run (though that long run is looking like Eons as opposed to years) and the company is trading at 8x that. They get hit when volatility works against them as their hedges become more expensive when implied volatility is much different from actual volatility. Money McBags mentioned this name the other week and it is worth keeping an eye on, though it is worth keeping two eyes on Olivia Munn, so not sure where you’ll get the extra eye to follow IBKR.
And readers, if there are small names you would like Money McBags to look in to, let him know. He’s here for you, well for you and Riley Steele.
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.