Posts tagged manufacturing
The market ran faster today than Roman Polanski going to get his keys to pick the baby sitter up because the manufacturing sector grew at its slowest pace since December, private construction spend dipped for the second month in a row, and Ben Bernanke said shit still sucks out there. So rally fucking on like Donkey Kong having his way with the princess, only if the princess had tainted his banana wth AIDS.
With the market rallying on macro news that was about as positive as a RuPaul pregnancy test, Money McBags is left to wonder what he is missing, how much the market would rally if there were actually something positive going on in the economy (like maybe either the second derivative of released data positively increasing or the unemployment rate decreasing and not just from a declining labor force participation rate), and how he overlooked this delightful NSFW Alice Eve scene which has caused his Oscar to stand and applaud. Money McBags is not quite sure how to interpret the market moving in opposition to macro data, as the language of giberrish wasn’t on the rosetta stone the last time he checked, but he hopes those of you buying in to this capitualting market are careful.
As for macro news, Benny B warned us that “we have a considerable way to go to achieve full recovery in our economy, and many Americans are still grappling with unemployment, foreclosure, and lost savings, in addition to the angst and nausea they feel every time they look at the deficit and realize their kids may be more fucked than Stephen Hawking in a duel.” Ok, perhaps that last bit was made up but, whatever. Bennie B did get slightly positive by saying he fully expects consumer spend to pick up in the next few quarters as wages rise, business demand picks up, and the US finally figures out what to do with all of the underwear they stole.
Money McBags is a bit skeptical of Bennie B’s claims since unemployment remains more stagnant than the Terri Moulton Horman for “Stepmother of the Year” campaign or jokes here on the great When Genius Prevailed so it’s not clear where these rising wages are going to come from unless it’s from laying more people off and then giving those still employed a bit of the saved salary, which of course would do nothing for overall consumer demand. But hey, when Bennie B gets his Fed on, the market listens (to the parts it wants to hear).
In other macro news, the ISM came out with their numbers for July and the manufacturing sector grew at its slowest pace this year, but luckily, the 55.5 number was better than the 54.2 analyst had guessed so rally on my friends. It was the third straight month (and the month was so straight it even got it up for a Kathy Najimy-Rachel Ray threesome) of slower growth but remember, readings above 50 still signal expansion, so apparently there is nothing to see here (except for new orders dropping to their lowest level in over a year, production slowing down, and Kagney Linn Karter).
In the final bit of macro news, construction spending rose .1% as increased investment in public projects (perhaps maybe a bridge to somewhere) offset the 15th straight monthly decline in private nonresidential construction and the .8% decline in private homebuilding (which included growth from the Greenspanville‘s being erected across the country, and yes, Money McBags said erected). Yowsa. As usual, last month’s new construction was revised downward from a .2% drop to a 1% drop as part of the government’s “hold the shock and hope for no awe” strategy, so this month’s .1% decline should be labeled as “wishful thinking.”
Internationally, China’s manufacturing sector cooled further as the government tries to reign in reckless speculation on real estate and ben wa balls. The official purchasing managers’ index fell to a 17 month low of 51.2 from 52.1, a separate PMI released today by HSBC and Markit Economics showed a drop to 49.4 from 50.4, and a third reading of PMI from the desk of Sum Dum Gai simply took the average of the two. China’s ec0nomy slowing down is actually favorable as it has been growing at a rate less sustainable than a conversation involving only eye contact with Christina Hendricks so having it moderate a bit and perhaps not inflate to a bubble like every other emerged economy would be beneficial for all involved.
Driving the market today was the European banking sector thanks to HSBC putting down its fag, rolling up its sleves, and earning the fuck out of some profits. The bank doubled its profits to $7B despite revenue growth declining by 7%, operating expenses increasing by 9%, and no one having any fucking money. Profits rose as losses on bad loans tumbled to $7.5B, just over half of last year’s losses, and were the result of bad loans rolling off the books and the bank not lending anyone any money. BNP Paribas also put up a good Q, with the French bank’s profits rising due to credit getting better and having Laetita Casta on call to help coax out customer deposits. Just like in the US, bank profitablity seems to be rising across the globe despite declining revenues as credit is improving. That said, credit can only drive earnings for so long until the banks are going to have to start lending to people again to drive revenue and thus the vicious cycle will begin anew.
In other market news, Blackberry is not just losing market share to the iPhone but now the UAE said they will cut RIMM’s data service like the dirty infidel that it is. The UAE cited security concerns over RIMM’s reliance on encrypted emails which make it easier for criminals to operate and harder for the government to watch that stupid fucking video of the double rainbow that everyone seems to be emailing around. Not since Peter Chung anointed himself King has there been an international email controversy like this and it does not augur well for RIMM’s jobs overseas going forward as other countries like Saudi Arabia are also thinking about taking steps to ban Blackberry’s mobile services.
Finally, KO got an upgrade today from JP Morgan on the strength of the company’s emerging markets and having read Money McBags’ columns about the solid brand equity overseas the company enjoys. An article in Baron’s also pimped KO today, saying it could rise by at least 10% in the next year because of North American markets and because it still tastes better than water. And last but not least, Corning was up nearly 6% on news that it’s 50 year old Gorilla glass could be the next bazillion dollar product for flat screens and touch screens as it is 2 to 3 times stronger than regular glass, half the thickness, and sells for only a few bananas. The lighter, sturdier glass should cut down on shipping costs and scratched screens while also being easier to clean after one gets done with a chat roulette session.
In small cap news, everything was up. Money McBags is short on time today but he wants to highlight KIRK which remains too fucking cheap even though it was up strong today. Money McBags broke KIRK down a little over month ago saying its low end market focus (midwestern/southeastern housewives who love tchotchkes more than Joanie loves Chachi), growth through the downturn (and now they are going to be opening stores instead of closing them), and valuation (it is now trading ~9x to 10x eps estimates not including the $3.50 per share of cash on the balance sheet) make it almost as attractive as Diora Baird, and nothing has changed since then except for John Kyl’s stand on the 14th Amendment. The other interesting small cap name is NTRI who traded down big on Friday after what Money McBags thought was an OKish quarter. He has to go through it in more detail and while he wouldn’t be a buyer of the stock until their management team actually performs (they are 0 for the last bazillion quarters, rounding up to the nearest bazillion), they pay a nice yield, have a terrific cost structure, and are in a growing (pun intended) market. It’s worth keeping on a watch list for when/if they can figure out how to start accelerating their growth rates (Money McBags votes for getting Nicole Eggert as a spokeswoman, but that’s just him).
First of all, Money McBags would like to thank all of you for your feedback yesterday. His inbox is currently overflowing like Whitezilla’s urethra after downing three cases of Mountain Dew in ten minutes (and feel free to google “Whitezilla” on your own time, Money McBags refuses to link to it due to good taste) but he promises to try to get back to each and everyone of you. The feedback was helpful as Money McBags learned that he does both too much analysis and not enough, the posts are both too long and too short, and the jokes both add to the analysis and detract from it. The only thing that was universal was that his readers love the pics so Money McBags is thinking of dropping all subject matter, words, and rational thought and turning WGP into another NSFW photo site. Anyway, Money McBags is still just short of his goal of 1MM visitors so if you all could spread the word, he will be able to continue to provide you with what you like best.
In macro news today, US housing starts declined by 10% to their lowest level since December (driven by a 17% drop in single family home building ) as the government tax credit finally disappeared like poor old Yorick did from the Danish royal court back in the day or America’s global domination. Not only did housing starts drop but they were way below analyst guesses as data and common sense apparently don’t figure in to analysts’ regression models (and Money McBags is anxiously awaiting the day analyst guesses regress to some fucking mean where the mean isn’t “dead wrong” or “not even fucking close”). Analysts guessed housing starts would come in at 650k, which would have been down 22k from last month’s 672k or down only 9k from the Commerce department’s newly manipulated number from last month of 659k (though the Commerce department uses the less pointed word: “readjusted”). In actuality, new housing starts were 593k, which is the 10% drop that is being reported, but since analysts used the 672k number released last month in their models (and not the newly made up 659k number), the drop was really 13% which shows that analyst models work as well as a union member in Greece or a Rush Limbaugh marriage (but hey, maybe the 4th time will be the charm). So by “readjusting” last month’s number, the market got the bump from a better than expected number in April and now doesn’t feel as bad about the drop since it’s being reported as 10% and not 13%. That is mind fucking boggling. Money McBags has less faith in any of these numbers than Elin Nordegren has faith that Tiger Woods wasn’t “sinking his putts” in only grassy holes.
But the most mind numbing thing about it all is that analysts were expecting only a 3% fucking drop. Really? I guess the government PUBLICLY announcing that the first time home buyers’ tax credit was going away didn’t make it up to the top of the ivory fucking towers on Wall Street where analysts dance their fat tails around pictures of Carl Freidrich Gauss while discussing their homoskedasticity and ignoring common fucking sense. Look, last month was a record month for new home starts and featured a 6% increase which was the most since October 2008, so the rational person would probably start with saying this month will probably feature a 6% decline, you know, the amount of the ARTIFICIALLY INFLATED (as opposed to artificially fellated) increase last month. And since the economy has improved by at most a Herve Vellachaize nut hair since then, why don’t we start by knocking some shit off the 6%, I don’t know lets call the baseline a fucking 8% decrease and then based on which way the wind is blowing, we’ll move it a couple % from there. Is that so fucking hard? While it’s an out of the ordinary least squares regression and the coefficient of determination may be less determinable than Caster Semenya’s gender, it makes a fuck load more sense than whatever analysts are doing. So here’s the deal. Money McBags isn’t going to open up his excel, he isn’t going to look at any data or any trends, and he’s going to spend fewer than 10 seconds on this guess but he’ll say next month’s new housing starts will come in a 585k, a slight downtick from this month as the economy remains stagnant and those people who rushed to get the tax break the other month will still have a negative effect on the absolute number of housing starts. Anyone want to bet if that guess is better than the econometrically arrived at bullshit spewed by the economists on the street whose PhDs are less practical than a bridge to Gravina Island? Rant fucking over, but Wall Street analysts, it’s on like Donkey Kong and this fucking Mario is going to save the princess.
In other macro news, manufacturing expanded by 1.2%, building on its .7% gain last month, and setting everyone up for a bigger drop when no one buys rebuilt inventories because they don’t have fucking jobs. Capacity utilization at manufacturing plants was up slightly and companies like Deere are seeing improvement as they said sales of utility tractors rose in the “double digits” last month, largely due to the need to shovel all of the shit economists have been spewing about the economy. Also, Producer prices fell .3%, or rose .2% if one uses the ridiculously derived core PPI that excludes food, energy, and intelligence. These low prices give the Fed a longer time frame to hold rates flat and reinflate the bubble (I mean economy).
Internationally, France and Spain are increasing their austerity plans. France has pledged to raise the retirement age by 2 years from 60 to 62 (though since they use the metric system, Money McBags believes that really translates to 29 years old), wants to raise income taxes on the rich, and will start charging fees based on the amount of armpit hair their women are sporting. Leaks of the proposed actions have somehow caused the French to once again surrender to the Germans while praying to the great Jerry Lewis that he’ll dump the MDA and adopt them as the new enfants de Jerry. C’est dommage bitches! Spain is also getting frisky with their workers again (though if those workers include Helen Lindes, who can blame them?). The Spanish prime minister Jose Luis Rodriguez Zapata, who never saw a spanish name he couldn’t add to his own, is seeking to spur full time hiring by employers while easing their layoff burden in order to get unemployment to drop from 20% to Spain’s historic unemployment rate of 19%. Money McBags isn’t sayng the people of Spain don’t work, well, actually, that’s exactly what he is saying.
In stock news, Fannie Mae and Freddie Mac have been told to delist from the stock exchange though the FHFA’s acting director Edward J. DeMarco (and the J apparently stands for “just kidding”) said that the action “does not constitute any reflection on either enterprise’s current performance or future direction, nor does delisting imply any other findings or determination on the part of F.H.F.A. as regulator or conservator.” Really? The performance of those two shitawful enterprises which has led their stock prices to drop below $1 because no one wants to fucking own them is not a “reflection of current or future performance?” Fuck, if that’s the case then markets are terribly inefficient (which they are thanks to high frequency traders) and Mr. DeMarco should sink his entire life savings into those shitrags (and Money McBags says shitrags with all due respect). In other company news, BP’s credit default swaps are now showing a 40% chance of default which means the market is only mispricing them by 60% so if you can, there is money to be made here despite BP agreeing to put $20B in escrow to pay claims from the oil spill while somehow also creating enough new water to drain the entire Gulf and refill the whole fucking thing since they’ve basically ruined that natural habitat like Robin Williams ruined comedy or Simona Halep ruined her post tennis marketability (and ask Soleil Moon-Frye what losing one’s Punky Brewsters can do to one’s career). In other stock news, Fed Ex is down despite a good Q thanks to a disappointing outlook casued by growing pension liabilites and increased maintenace spend needed for their aircrafts. Now Money Mcbags doesn’t want to sound overly morbid here, but why not just not fix the planes and have the older workers fly them and thus kill two birds with one stone (figuratively and literally).
In small cap news, QCOR is up another 10% despite getting the Heisman from the FDA on Friday, pushing back the decision on approving Achtar for IS for the 9 billionth time. Money McBags has talked about this ad nauseum (though not as nauseum as Lady Gaga’s face, or her music) and he likes the company, especially with the potential for the NS market, but the stock is starting to get overvalued here. Money McBags only has them earning $.60 next year and their gross sales were actually a bit disappointing this last Q. Net sales had been running at ~68% of gross sales and this last Q they were 78% and Money McBags still hasn’t heard why that was other than perhaps their reimbursement issues with Tricare were fixed. The point is, Money McBags thinks this Q coming up will disappoint and you will get a better opportunity to buy this in a couple of months. That said, the CEO has done a nice job turning this company around and pointing them in the right direction. Finally, keep your eyes open for WGO’s earnings report tomorrow to see if their core business can break even and how much cash from operations they burn. They might have one more decent manipulatedly good quarter, but this stock is looking at a bigger uphill climb than Stedman Graham has to take on “couples night.”
Stocks bounced around today like BP’s excuses for the Gulf oil spill or like Kelly Brook’s “oil domes” while she jumps on a trampoline. Solid US economic data pushed the market in to positive territory in the morning, giving investors a slight glimmer of hope before that hope was flushed away like a 3 story building in a Guatelamian sink hole or the Sears Tower in Paris Hilton‘s pants. Leading off the slew of economic reports was that manufacturing in the US grew at a faster pace than analysts guessed with the ISM index coming in at 59.7, a whopping .7 above expectations. The rounding error was driven by increased demand for exports which will clearly be short lived as the dollar strengthens against the Euro. That said, the ISM’s employment gauge climbed to its highest level since May 2004 when the subprime boom was still just a twinkle in Alan Greenspan’s eye. Factories did add 101k workers through the first four months of the year which is likely a huge relief for the 20MM americans still unemployed, and yes, that was sarcasm. Construction spend in the US also rose by 2.7% which was the most since April of 2000 but it was likely spurred by the ending of the first time home buyers tax credit so it is more likely an outlier (like the straight Wiggle) than a sign of real recovery.
While US economic reports were as positive as a Pam Anderson hepatitis test, international macro data was as negative as an antithalian at a county fair. Leading the way was data on unemployment in Europe where the 16 countries who use the Euro saw unemployment rise from 10% to 10.1% with Spain coming in at a robust 19.7%. Making matter worse was that the Euro fell to a four year low against the dollar, though it claims it is just low because it is practicing its limbo technique for its 18th birthday bash also honoring the Treaty of Maastricht and Kaya Scodelario. The Euro remains on shakier ground than Al Gore’s marriage as it drops towards $1.20. In other international developments, China’s manufacturing grew at a slower pace than guessed as the government tries to curb its bubblicious growth. China’s Purchasing Manager’s Index fell to 53.9 which was lower than the 54.5 estimates even though it included an ample dose of MSG. The government is said to be introducing taxes on property holdings, cutting back loans provided by state owned banks, and only allowing one chopstick to be used at all meals. China has simply grown too fast as the government unleashed huge spending programs last year so efforts to reign in the economy now are better than trying to do it later when it’s too late, you hear that Bernanke? Finally, the Bank of Canada raised the country’s interest rate by 25 bps to 50bps causing the loonie to weaken a bit against the US dollar. It was the first rate hike by Canada in three years and Canada now becomes the first G7 country to raise rates as inflation begins to rear its ugly head.
In stock news, HP is set to cut 9k jobs due to automation and CEO Mark Hurd’s cold heart while AAPL is rising on reports that it has sold 2MM iPads and those are just the ones purchased by Steve Jobs’ ego. GOOG is also up today and they announced that they will only allow employees to use Linux operating systems blaming the overall crappiness of MSFT Windows for their Chinese operations being hacked. The dumping of MSFT has made Bill Gates feel like he was back in high school. Finally, BP is getting shit canned again, as they should be, with their “top kill” attempt to stop the oil leak failing worse than Gary Coleman’s liver (what, still too soon?). Money McBags has avoided writing about this catastrophe because thinking about it makes him wonder if he has been incorrectly using the word “clusterfuck” for all of his years.
In small cap news, QCOR continues to rally with investors awaiting FDA approval for QCOR to be able to market their Acthar drug to the infantile spasm market. You know, the market in which they already have the leading fucking market share. Money McBags has broken down this stock many times (just put QCOR into the fancy search box up top) and is excited for their nascent NS market but he is still confused as to why their Net Sales were such a high % of their Gross Sales last Q. Also, a small crappy company Money McBags follows yet has been embarrassed to bring up before, NTZ, put up a decent quarter on Friday but is now continuing its slide to $0. NTZ produces high end upholstered furniture like sofas, love seats, and bondage benches (ok, maybe not the last one but the definition of “love seat” can be so nebulous). But here’s the kicker, NTZ is an Italian company with ~50% of their sales coming from Europe. So it sells a high end, highly discretionary consumer product targeted to european clients with Europe in the midst of bail outs, a crumbling Euro, and record unemployment. Wow. Investing in this company is like those old SNL Bad Idea Jeans commercials. Honestly, buying shares of NTZ is dumber than jumping in to a Hot Tub Time Machine set for the 1980s and then going Lucky Pierre between Magic Johnson and Rock Hudson. You might as well have bought shares of Amercian Home Mortgage right as the subprime mortgage market was melting down, invested in Daguerreotypes in the mid 19th century, or hired Bernie Madoff to manage your assets. So why is Money McBags following/writing about this company seeing as how it is apparently more fucked than Taylor Rain in a Monsters of Cock video? Simple, because it is cheaper than balls in the Castro. The company just put up a quarter where they actually had revenue growth, but to be fair, revenue had fallen more than Eliot Spitzer’s dignity after emptying his “mini-bar” at the Hotel Mayflower so the comps were easier than winning a spelling bee on a short bus. Their net sales grew 14% to 126 Euro and their margin was up y/y from 25.5% to 38.5% which was inline with last Q. This was enough to give them a .5MM euro operating income which is still piss awful (and not regular piss, but burning gonorrhea piss), but at least it is positive. Of course, after taxes they lost 1.3 euro but tax rates in Italy are about as predictable as Lindsay Lohan‘s behavior after taking a powder break and as far as Money McBags can tell more spuriously correlated to profits than the market currently is to company fundamentals. So lets throw out the taxes and look at EBITDA. NTZ had ~8MM euro of EBITDA this Q and translating that to dollars is about $.99 or enough to buy a pack of M&Ms. Actually, with the Euro now settling in around $1.20, that would be ~$9.6MM in EBITDA and the company has a $196MM market cap and $66MM of net cash (55MM euro) so ~$130MM enterprise value. So if you annualize their EBITDA, it’s trading at ~3.5 EV/EBITDA and less than .5 sales. Sure they burned through a little cash this quarter, sure annualizing that EBITDA is giving them credit they may not deserve, sure they have one year of profitability in the last five, and sure they are selling one of the stupidest fucking items in one of the worst possible markets in the last 100 years, but how much worse can things get? They cut selling expenses by ~15% for the year last year and are running at about that same rate so they have seen nice operating improvement and if sales can level off, there is no reason this company shouldn’t trade at more than 3.5x EBITDA. The point is, despite their CEO dropping another turd in the punchbowl by saying on the quarterly call that “the economic crisis and the worsening market conditions are not yet over and the Group order flows for the first months of 2010 with respect to the last months of 2009 confirm a slow down as compared to the previous positive trend,” this company is trading as if its business is going to zero, which may well be the case, but they still have $66MM net cash and decent brand equity. Even if Europe crumbles like Alan Greenspan’s reputation, rich people are still going to spend on shit they don’t need and as long as this company can stay afloat and keep their cash burn to a minimum, there should be long term upside. Money McBags is not saying you should buy today, or even ever, but this is a stock that will shoot up faster than a heroin addict going through the DTs if and when the global economy stabilizes. So put this on your watch list, be glad you haven’t owned it, but be ready to pounce if shit starts gettting better.
5/3/10 Midafternoon Report: Consumer spending up as sales of moral hazard increase (though to be fair it does come in blue this season)
Stocks are off to the races again today and the good news is that the market is seemingly being ridden by Calvin Borel. Sending the market up is that Greece is once again set to be bailed out, Warren Buffet was out defending Goldman Sachs, and people are spending more than they earn. Hold on a second on that last one. Now look, Money McBags is no historian (though he knows the difference between Dred Scott and Avy Scott, knows that neither tea nor pot was involved in the Teapot Dome scandal, and knows that the War of 1812 not only ended in 1815 and thus is a bit of a misnomer but also ushered in the “Era of Good Feelings” where bipartisanship was shunned and taint tickling Tuesdays swept the nation), but spending more than one earns is what got us in to this whole fucking recession. Anyone remember the popular sport from the mid 2000s called flipping fucking houses? Well it caused the economy to be flipped as people just borrowed the fuck out of shit because banks were able to package all of those crappy loans and sell them to yield hog investors who wanted those extra 10bps of interest income. The point is, consumers not managing their personal balance sheets with eyes on the future (though if their eyes were on Katie Price, Money McBags can almost forgive them) is a recipe for fucking disaster which we just learned, oh I don’t know, 24 months ago. Ugh. To highlight the shortsightedness of consumers, consumer spending was up today, but it grew twice as fast as incomes grew. And if you do the math on that (and remember, math likes to be done in the reverse cowgirl position), that means savings declined, which again, is exactly what got us in to this mess. American people apparently just like buying shit and then whining about it when they lose their jobs and can’t afford to pay their too expensive mortgage or their maxed out credit card bills. This is a nation of infants and if they don’t figure it out soon, Money McBags is going to go door to door with Jeremy Grantham and the pinheaded Suze Orman and he and Jeremy will take turns buggering Ms. Orman and her inflated FICO until people understand having money saved for retirement is more important than buying a new Shake Weight. Rant over.
In other macro news, manufacturing grew at its fastest pace since 2004 as the ISM’s factory index rose to 60.4 which was inline with analyst guesses. The growth was driven by new equipment orders and increased production of default notices. Also new construction was up modestly, but the fact that it was up at all has Bulls giddier than Peter North’s son on take your kid to work day. What drove new construction was public construction which was up 2.3% and state and local government construction which was up 2.5% as new line dividers were constructed to keep the crowds at the unemployment office running smoothly.
Internationally, Greece is getting a 110B bailout in euros over a three year period, until tomorrow when Angela Merkel’s cold feet and colder heart once again change her mind. To get the bailout, Greece has to instill a 30B austerity plan, cut their debt, and promise to tell native born son Yanni to shut the fuck up. Even with the bailout, Greece’s debt is estimated to rise to 140% of GDP in 2014 which is a whole lot of souvlaki they can’t afford. The bailout may be giving investors a day to breathe a bit easier but with the amount of debt Greece is going to have to repay and the cuts to their publc spending, the country is now facing real threats of deflation and the first potential revolt since Alexander Ypsilantis led the Filiki Eteria.
In the markets today, Warren Buffett was out defending Goldman because, well because he owns a fuckload of GS preferred so you know, he has to defend his fucking book. Buffett defending Goldman is about as much of an endorsement as Michael Brown defending the hurricane Katrina response, Jerome Kerveil defending his trading, or Tara Reid defending plastic surgery. So big fucking yawn there. In other market news, United and Continental announced a $3B merger. The deal was actually consummated a month ago but was held up due to weather (feel free to steal that one Jay Leno). And Apple annonuced they sold over 1MM iPads thanks to them coming installed with Diora Baird wallpaper. Lastly, semiconductor sales were up 4.6% in March as PC and smartphone sales continue to rise and inventories climb back to normal levels. Money McBags is longer the technology/smartphone trend than Lexington Steele is before a scene with the lovely Lisa Ann.
In small cap news, Money McBags bought TMRK close to the open today in the mid $7.30s. He has talked about TMRK many times (starting on 1/4/10) and finally pulled the trigger for no particular reason and he has no idea why it is up so much today other than the fact that Money McBags is a market mover. Money McBags is feeling better about TMRK after they raised $50MM last week which should give them enough growth capital and they are still trading at a discount to larger peers. TMRK has a competitive advantage in that they have a lot of government business (~22% of revenue) and they are in a market growing 20% a year with some big players (Amazon, Google) who are clearly going to be looking for acquisition targets to consolidate the space. TMRK is trading ~9x 2011 EV/EBITDA estimates but that is lower than where EQIX bought SDXC and not only that, but VMware who is the leading software developer in this space (and portfolio holding of Money McBags) has a nice sized investment in TMRK. If VMware doesn’t know this space better than 99.7% of the world, than Money McBags will eat a giant shit sandwich with extra diarrhea. Now Money McBags doesn’t expect this stock to rocket up any time soon as they are still going to have lumpy quarters and are still investing in building out data centers, but cloud computing growth is more real than Pam Anderson‘s tits (though perhaps that is a low bar) so TMRK should continue to be in a fragmented multi-year growth industry. In other small cap news, NTRI reports tonight and Money McBags is very curious to see what happens to their advertising spend. If you remember, two months ago Money McBags broke down NTRI‘s craptastic guidance which was so bad it caused investors to throw up for days and thus more effectively lose weight than using NTRI products. The company is still trading ~7x EV/EBITDA which is pretty cheap for a solid cash generator and nice business model when they aren’t fucking up their advertising strategy. Money McBags has no idea what NTRI’s Q is going to look like but it is worth paying attention to tonight because the stock should be more volatile tomorrow than Mike Tyson after missing a week of his medication and having some of his pigeons stolen. This could be a good entry point (though still not as good of an entry point as Jessica Alba’s derriere), so pay attention to earnings.
4/15/10 Midday Report: Tax day causes 53% of the US population to be pissed, other 47% pissed every day about being broke
Oh shit, just when the economy was looking better than a threesome with Hayley Atwell and Alice Eve, new jobless claims for last week rose for the second week in a row and economists didn’t have Easter to blame this time. Well, actually they did, as a government analyst once again warned that the numbers could be skewed since Easter falls on a different day each year. Wow, really? You’re going with that excuse again? Umm, if Money McBags is correct the numbers are seasonally fucking adjusted and since calendars have existed since shortly after the fucking neanderthals were exterminated (which was caused by too much contaminated dinosaur meat since those smallbrained fuckers never learned how to fucking use fire), shouldn’t that seasonal adjustment adjust for Easter? Seriously, it’s not like the day it fell on surprised anyone last year or this year (well, except for maybe Amy Winehouse or the hippocamus-ly challenged), so that excuse is lamer than Spectacular Bid or Boy Meets World reruns. Claims rose by 24k to 484k which is the highest since late February and the highest since the Great Walmart Lockout of 2006. There are still over 10MM people receiving some kind of unemployment benefit and since those benefits don’t include being tucked in by Ashley Dupree (very NSFW, but required viewing), that’s not good. In other macro news, defaults doubled in the government’s loan modification program which is weird to think that people who couldn’t afford mortgage payments still can’t, even at lower rates. It’s like being surprised that a kleptomaniac might want to steal again after being released from jail or that Tiger Woods is likely boning skanks again despite going to the laughable sex therapy (by the way, it’s not called “sex addiction,” it’s called “having a penis”). In positive news, manufacturing production in the US gained as output of factories rose .9% with companies building back inventory while the Empire State manufacturing report demolished expectations. The survey came in at 32%, well above the expected 24%, and Money McBags has no idea what that means other than beating expectations is good and at least New Yorkers have something to cheer themselves up about while watching the Mets.
Internationally, Greece is back in the news again trying to screw up something good we all had going with the markets. It’s like we’d been asking the markets out for 2 years, finally got her to come to dinner, got her home, and as we were about to inspect her large Sharpe ratios, the ruphies wore off. So thank you Greece for scaring the markets again with your rising interest rate spread. Of course there is more of a chance of the Laffer Curve being right than there is of Greece going bankrupt, so Money McBags will be buying at any big market dislocation caused by rumors of our Hellenic friends going to take a ride on the river Styx (though if they go to Styx, they should give a big “domo arigato” to Hades).
Also interntationally, China’s economy is surging like William the Conqueror’s popularity among the French in 1066. GDP was up 11.9% from last year which is more bubble-icious than Gonzo Grape. Not only that, but investment in real estate was up 35.1% and housing prices were up 11.7% in March alone. Wow. China is definitely hitting on all cylinders and their economy is busting out more than Lina Li thanks to the ginormous government stimulus, the artificially deflated currency value, and the accelerating population growth.
In stock news GOOG is running up in to earnings since, you know, they are fucking GOOG. Money McBags should have bought more but it is already an outsized position for him so he’ll root for the best with their earnings report and likely buy any dip. UPS pre-reported their earnings today and grew profit by 37%. They earned $.71 per share, well above analyst guesses of $.58, and upped their full year EPS guidance from $2.70-$3.05 to $3.05-$3.30. Wow. Apparently people really want to ship some shit that can’t be attached in an e-mail. This is a huge signal to the strength of a business rebound. International shipping was up 18% and while US shipping volumes were up less than 1%, it was the first growth in US shipping in two years. So yeah, it is barely up from a much lower base, but this is how things start out. A very encouraging quarter from UPS.
In small cap news, NTRI is starting to run and Money McBags has broken their business down a number of times here. They are cheap but operational issues keep Money McBags from owning this stock. Also, MLNK is trying to rally back from a huge sell off after missing their quarter. Money McBags has analyzed the fuck out of this company but it is ridonkulously cheap on an EV/EBITDA basis, trading at ~4x with a bigger cash cushion than Jennifer Lopez’s ass cushion. This is a small holding of Money McBags and he is currently down ~10% on it but is thinking about nibbling at some more. The biggest issue is that their excuse for missing the quarter made less sense than Kathy Griffin’s career as HP is their biggest customer and was up 10%, yet MLNK’s sales were down 9% even including revenue from an acquisition. It is more head scratching than crabs as to why their revenues performed so poorly and why their guidance was down as the global economy and the consumer are picking up so this company should be seeing revenue growth off of such depressed numbers. That said, the stock has started acting better, so it is worth watching.
Wow. The market ripped up today like it was competing for the Ansari X Prize in 2004 or like it was rushing to claim the last seat in a dream Hayley Atwell-Kate Bosworth Ultimate Surrender match (nsfw, unless your work doesn’t suck). Technology led the way thanks to an upbeat report on chip sales and the fact that we are at the inflection point of exponential technological growth, regardless of the economy (or at least Ray Kurzweil’s fancy graphs say so*). Chip sales were up 47% from last year and .3% from December leaving Semiconductor Industry Association President George Scalise (whose last name is an unfortunate anagram for one of the world’s worst afflictions, “ass lice”) to explain that sales were helped by “growing demand for semiconductors used in personal computers, cell phones, automobiles and industrial applications.” He then pointed to the reporter and while being egged on by his minions used the old SIA favorite line, “Is that a pre-Moore’s Law semiconductor in your pants or are you just happy to see me.” Along wth a positive report on semi sales, consumer spending was up .5% despite incomes only being up .1% which led to the lowest savings rate since January of 2008, you know, back when the market was crashing because EVERYONE WAS FUCKING OVERLEVERAGED. So at least it looks like that problem has been solved. This country continues to treat savings like Lindsay Lohan treats vaginal hygiene or Larry Craig treats truthfulness, but hey, at least spending more than one earned sent the market on an orgiastic run today, so damn you common sense. In other macro news today, the ISM’s factory index fell to 56.5 from January’s 58.4, which was a 5 year high. While a number falling is usually a bad thing, unless it’s the number of times Sweet Homa Alabama is played on the radio, the ISM index was still above 50 and that magical made-up line of delineation apparently indicates the economy is still in expansion based on the at times subjective inputs of the purchasing managers reporting to the ISM. However, according to the ISM website, a “PMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy,” so that magical 50 number that people are claiming is good, could be as low as 42 and everything would still be ok. Whew, I am glad we have an arbitrarily declining scale to measure whatever it is the PMI measures, though perhaps they should hire some of the 20MM unemployed people to take more exact readings on what managers are purchasing.
In stock news, AIG sold their Asian life insurance unit to Prudential for $35.5B and PRU’s promise to love them long time. The sale will allow AIG to pay back the government and strategically rids them of one of their most profitable companies, thereby continuing AIG’s policy of doing things that suck. While selling assets is something AIG needs to do to get out of debt, selling their profitable business is a bit like McDonalds selling Burger King the rights to the Big Mac and thus leaving them with just the Filet O’Fish and Salmonella McNuggets. AIG is also determined to sell their US life business to MET, which means they can focus on their prized P&C business which was only one of the biggest reasons they underperformed last quarter. In other large cap news, Sandisk was up 11% today after raising their first quarter revenue guidance by 6% during Friday’s analyst day. This caused analysts to upgrade the stock including Wedbush’s Betsy Van Hees who had a sell on the company but was able to finally get the sand(isk) out of her vagina and raise SNDK to neutral.
In small cap news, Money McBags favorite MLNK shot up 6% likely on the positive semi news which should augur well for the computer market. MLNK still remains more undervalued than a taint licking. Money McBags broke MLNK down for all of you in January, but the company has treaded water since then despite the fact that their $.17 quarterly eps can easily turn into $.22 with just continued cost cutting. Add in just a Pam Anderson‘s dignity amount of growth and you’re at $.25 per quarter eps or $1 for the year. So with very little positive news, MLNK could take off and rise out of it’s way too cheap valuation of 10.5x eps and 4x-5x EBITDA with a ton of cash on the balance sheet. This stock should be owned by anyone who hates being poor, so Mickey Rourke need not apply. Also, another Money McBags stock which is frequently blogged about on When Genius Prevailed, RICK, briefly bounced up to Money McBags sell target of $16 today before getting absolutely ass raped around noon. No one has witnessed a nooner that violent since David Carradine dined alone in his hotel closet. Look at the chart below and notice right at 12:45 someone wanted to get the fuck out like RICK was two girls and they were the one cup. Huge volume. The stock usually trades about 200k shares a day and in a 15 minute span almost 600k shares blew out on the market. Perhaps every quant fund had Money McBags $16 price target hardwired in as the sell time as we all know Money McBags moves markets, or perhaps one of the 20 funds who own 600k+ shares had a little too much champagne in the chanmpagne room, but fuck did someone want out of this thing.
Money McBags is a bit flummoxed by the need to puke out so many shares and it reeks of a capital call, except funds should be relatively stable now, so this run for the door is more perplexing (and nowhere near as delicious) as teenage girls claiming that having anal sex still leaves them virgins.
Tomorrow’s blog may be out late, so follow Money McBags on twitter for updates.
*For those futurist tech geeks out ther Money McBags hopes to put his singularity near Kurzweil’s prophesized spiritual machines, especially if they’re as frisky as Riley Steele. So keep grokking Spock, my friends, keep grokking Spock).
2/18/10 Midevening Report : Bernanke preemptively raises discount rate, causes Alan Greenspan to roll over in his grave
Aw shit, it is now on like donkey kong as the Fed is getting serious about some shit. This ain’t your Greenspan pushover, lolligagging, lobster tails and blow jobs for everyone, bubble creating Federal Reserve. No siree, this Bernanke guy is a straight up pimp and will bitch slap the market back to reality and remind them not to take daddy’s money before they get too uppity on him. With the markets running off of a 3 day orgy filled with earnings, mediocre economic news, and a potential bailout to get the EU out of the greek headlock in which they have been painfully trapped, Bernanke had had enough. We all remember when the fed minutes were released yesterday and one of Bernanke’s henchman, T-Ho (Fed Reserve of KC bank president Thomas Hoenig) started to warn Ben about getting high off his own supply by keeping rates too low. Well Benny B took that to heart and after the market closed he took out his pimp hand and smacked the shit out of the market by surprisingly raising the discount rate to 75bps while yelling “That’s right market, don’t forget, I’m you’re daddy. Come on, say it. Who’s your daddy? Let me hear it. You know you want it tight in the discount window.” This is the first time the rate has been increased in three years and will likely halt the market’s rally tomorrow.
Aside from Bernanke trying to win his cock-off with the market, macro news was mixed today with the Philly Fed saying manufacturing had picked up again and new orders are at their highest levels in 5 years (of course in Philly, those new orders are for Uzis, Butterscotch Krimpets, and fecal matter to make the city even shittier than it is). New claims for unemployment also came out today and were worse than expectations, rising by 31k to 473k as opposed to falling as analysts had expected. Money McBags has been through this before, but if you’re an analyst, can you at least get the direction correct? For fucksake you have a 50% chance, I mean it’s not like the 33% chance you have in guessing “man, woman, or tranny?” with Kathleen Turner. Finally the PPI came out today (as opposed to the pee pee eye that landed R Kelly on trial) and was up 1.4% signalling inflation. While the core rate was only up .3%, it was still worse than the .1% expectation. The point is, inflation is coming and it’s a good thing Bernanke looks to be proactive about it.
WMT had their earnings announcement today and beat earnings expectations yet had negative same store sales growth as a result of declining traffic. Their guidance for Q1 was also almost as bleak as John Tyler’s 1844 re-election campaign or Heidi Montag’s Celebrity Jeopardy! prospects as they said it will be a challenging quarter. The stock was down moderately today but if Bernanke is determined to quiet the market, shares of WMT may become more interesting if they fall another 5%.
Finally in small cap news WILC was down 10%. Really? No, really? There are people who want to puke out a company trading at less than 4x EV/EBITDA, less than 10x earnings (or 5x earnings if you take out the 50% cash they have on the balance sheet), with growth prospects to potentially double revenues? Seriously? Unless you think CEO Gee Willi Zwi Williger is blowing smoke out of his shofar and is fooling his auditors and submitting his financials in crayon on the back of a discarded yarmulke, there is absoltuely no fucking reason to be selling this stock here. It is still cheaper than a pail of salt water on the sunken island of Atlantis or the self respect of an 18 year old wanna be model on her first Hollywood casting couch. Yeah, Money McBags knows it is a weird fucking company (he broke it all down for you way back in 2009) and he also knows that the volume on this stock tends to be thinner than a bulimic with an oversensitive gag reflex, but for fucksake, what is it going to trade down to? Cash? A business earning money with no debt and growing is going to trade down to cash (which is only 50% downside from here)? If that’s the case than Money McBags clearly has no idea what he is doing and needs to get of this business and into whatever idiots do, like maybe politics, making oven mitts, or running the LA Clippers. Unless this company is completely full of shit like a constipated political consultant, it is a fucking screaming buy. And yes Money McBags owns it, so yes he is talking up his book. Full fucking disclosure, as always.
2/17/10 Midevening Report: Fed hints at reversing stimulus, starts by canceling Bernanke’s Playboy subscription
The market was up today like a hooker’s skirt in Tiger Wood’s SUV. The rally was driven by earnings, earnings, earnings and some macro data. Apparently people are still building houses as housing starts hit their 6-month high, rising 2.8% to an annual rate of 591k. This marginally beat expectations and should be a good sign for the economy, even if half of the houses were built from legos and the other half have already been forelcosed on. In other macro news, the Fed announced that industrial output grew .9% which also beat expectations with capacity utilization coming in at 72%, 8% below the average from the last 37 years. So there is still room for the economy to rebound and thus produce more of those delightful “For Sale” signs to go in front yards, printers to print out resumes, and muzzles to put over Lady Gaga’s face. Also, import prices rose by 1.4% signalling inflation may be on the way (and for those of you who need a less subtle signal: INFLATION IS COMING!! And Ben Bernanke is going to have to make inflation think long and hard about baseball for him to try to stop it from coming). Many analysts were unphased by the rise in import prices claiming oil and natural gas drove up prices, so I guess it’s good we don’t rely on those fuels at all or else we might have to worry a bit more about the dollar. Phew.
There was one piece of macro news which caused a brief sell-off before the market put back on its pearl necklace and returned to the ball (and yes, all of those were very bad puns). The minutes came out today from the last FOMC meeting and the head of the Kansas City branch of the Fed, Thomas Hoenig (known at the Fed as T-Ho), was the one dissenting vote on interest rates. T-Ho got all up in Benny B’s grill and axed him why they needed to say the fed funds rate would remain low for an “extended period,” preferring to change the language to say the fed funds rate would remain low for “some time, and shit.” The minutes also revealed that the Fed is starting to look at downsizing their balance sheet and selling into the market the toxic assets, I mean mortgages, they previously bought. The key message here being that further stimulus to help the economy may be less likely than Brooklyn Decker dumping Andy Roddick for the first guy eliminated from next season’s The Biggest Loser. The Fed might actually be doing something smart here by looking to get in front of a bubble and stopping it before it happens rather than pulling an Alan Greenspan and blowing hot air into it like it was Andrea Mitchell’s rectum.
In earnings news, Deere’s profit climbed 19% and they raised forecasts thanks to strength in “large ag equipment”, or what’s more commonly known as: “Rosie O’Donnell’s dildos.” Also, WFMI not only had a kashi-tastic quarter as Money McBags predicted yesterday, but is was double fiber kashi-tastic. WFMI same store sales were up 3.5% and they gave total revenue guidance for 10.5% growth in 2010 while raising full year earnings guidance to $1.20 to $1.25 per share, about 10% above current estimates. Yeah, it was a good Q but they are now trading at around 25x 2011 earnings which wouldn’t be so bad if they were growing by more than 10%. Of course, EBITDA was up 25% and they raised EBITDA guidance by about 5% to $635MM-$685MM for 2010 which means they’re trading at around 7x to 7.5x 2010 EV/EBITDA which actually isn’t all that unreasonable. Money McBag’s guess is that there was a whole lot of short covering today and in the next couple of weeks WFMI will come down a bit, but it is still trendier than Jessica Biel giving free blow jobs to bloggers (and trust me, that is going to be a huge trend).
In small cap news, RICK reported yesterday and they managed to not only shit the bed, but then they announced they were going to buy VCGH and shit all over their bed too (though to be fair, VCGH’s bed was plenty shitty to begin with). Money McBags never thought he would be unhappy getting fucked by someone at RICK, and RICK not only fucked him, but they sent the 40 year old C-section showing, needle marks in the arm having, 2pm shift D-team dancer to do the job. Jeesh. Could they at least kiss me next time before they fuck me? Actually, scratch that. I mean I love the lovely ladies at Rick’s who express themselves through dance to pay their college tuition, but they probably have more lip herpes than Richard Simmons has anal warts, so they can hold off on the kissing. Anyway, RICK reported the quarter that Money McBags had feared since they bought their Las Vegas club. You see, in order to win business in Vegas, Rick’s pays the fuck out of cab drivers to bring patrons to their club. It is labeled as marketing costs, but it is payment of cash to cab drivers as clubs compete for traffic. All of the clubs kind of collude to keep that price to around $20, but to gain business and to slap their cocks on the table and let other club owners know they are serious, RICK had been occasionally upping the ante to as much as $100. Well it looks like in this quarter that occasional upped ante was both not occasional and was so far up that it gave itself a cerebral edema from hypobaropathy. Rick’s marketing costs soared by $1.7MM to $2.9MM and treated their earnings like an Alabama professor after learning she wouldn’t be tenured. Now on the call they said the marketing increase was related to more than just the Vegas club and that the Vegas club turned a profit in January and should be profitable for this Q, so that makes Money McBags feel a bit better, like how Jessica Simpson felt when she learned stupidity wasn’t contagious, but it is a huge red flag. Their earnings missed the high end by $.08 which is actually slightly less than the uptick in marketing costs. Revenue was up a healthy 16.5% but it was achieved in the most unhealthy way, by paying people/cab drivers to show up. To Money McBags it is a huge concern and kept him out of the stock until a few months ago. Now on top of their shittastic performance, they announced a $45MM cash and stock acquisition of VCGH which will make them the largest strip club operator in the world. While Money McBags is a firm believer in bigger is better (such as the fine backsides of Carmen Kinsley and Alexis Texas), this deal has a ton of dilution as Rick is going to have to issue somwhere around 2.5MM shares and thus increase their share count by 25%. Rick’s maintins that they will benefit from synergies such as corporate overhead, regional management, and shared thongs, and thinks EBITDA will be $25MM for the combined company. They also reaffirmed guidance for 2010 without VCGH of $.90 to $1.05 per share, so they are still fairly cheap on a p/e basis. The biggest problem is that Money McBags can’t really analyze this deal because VCGH stopped filing financials months ago so there is no way to understand if their clubs are even remotely profitable. So you have a shitty quarter, a questionable deal, and a stock that has been on the move but is still cheap if you believe the marketing uptick was a one-time offense (and Money McBags has no idea about that). If you own RICK, it might not be a bad idea to trim a bit here, and if you’re at Rick’s, it might not be a bad idea to see some trim there. Alot of questions remain after this call such as will decreasing marketing costs hurt top line, what does Rick’s new cap structure look like, and can a brother get a table dance? Unfortunately, after this quarter there will be no sex in Money McBags’ champagne room and for those RICK’s owners, you should really due some more work. Money McBags is holding for now, but leaning towards selling some as it’s unclear how RICK will still hit their guidance for the year after missing this Q and how they will grow if they lower marketing costs, since if lower marketing costs were to allow them to grow, why wouldn’t they have been lower this Q? Damn you logic.
The big news spooking the market today is Obama’s unknown plan to try to regulate banks. He is now said to be giving former Fed Chairman Paul Volcker the keys to palace and Volcker is rumored to be getting all Glass-Steagall on bankers’s asses telling them they can’t trade financial securities using their own deposits. Money McBags is usually for the free market (especially if that free market specializes in foie gras or taint cleanings), but large financials firms need to be regulated. They have too much sway over the global economy, like Rasputin had over the Tsaritsa Alexandra or ugly chicks have over former President Bill Clinton.
The other news moving the market today is that China’s GDP rose the fastest it has in two years as it grew 10.7% thanks in part to their ability to make really cheap shit and therefore have consumers need to continually replace said really cheap shit when it breaks/tears/poisons them. Q4 economic growth was driven by a $586B stimulus package, subsidies for consumer purchases, a credit-fueled investment boom, and buy one get one free happy endings at local Shanghai massage parlors. The strong growth in China has investors worrying that the Chinese government will finally try to slow down their lending to avoid more of a bubble than they have already created, which in turn will dampen the global economic recovery.
In US macro news, first time claims for unemployment rose last week by 36k to 482k defying analyst expectations for a 4k drop. Money McBags is not going to harp on analysts for getting the number wrong as he knows it’s not easy to guess at a number that can be anywhere from 0 to 300MM, but guys (and gals), can we at least get the fucking direction right? You have a 50-50 chance on that one which is slightly better than your odds of not contracting herpes from shaking Tiger Woods’ hands, so can we do a little better? Luckily an economist for the U.S. Labor Department (or as it is soon to be renamed, the U.S. Non-Labor Department or simply You’re Fucked) cleared everything up by claiming that last week’s numbers were higher than expected in part because the Christmas and New Years holidays created a backlog in some states. To quote this brilliant economist: “It is not an economic thing — it is an administrative thing.“ He then went on to explain that the recent market crash also “wasn’t an economic thing, it was a math thing,” John Edwards denials about being some broad’s baby daddy “wasn’t a lying thing, it was a syntax thing,” and for the ladies out there, swallowing after a hummer “isn’t a romantic thing, it is a nutrition thing, so bottoms up” (when of course, we all know it is both). The main point is, whether or not the rise in new unemployment claims was due to an anomalous administrative glitch or more people simply losing their fucking jobs (you know, what the statistic actually measures), there were still at least 450k people who recently filed for unemployment so this economy is about as healthy as Amy Winehouse at an all you can smoke crack bar or a Krispy Kreme donut with extra transfats.
Also, the Philly Fed showed the pace of manufacturing slowed a bit in January as the index fell to 15.2 from 22 and was below the expectations of 17. Apparently a positive number still signals growth so since we have no idea of the impact of the relative values of the arbitrary numbers (how much worse is a 15 than a 17? And about 10% is not likely the correct answer), all we can say is that the Philadelphia area produced some shit, though it was likely all stolen by the residents, so should have minimal economic impact.
In stock news EBAY put up a huge quarter as PayPal revenue was up 28% thanks to an uptick in Nigerian princes needing funds to return to their homelands and reclaim their fortunes, while Starbucks (SBUX) beat analyst estimates by quadrupling profits from a year ago. Same store sales were up 4% proving that overpriced coffee may be a giffen good. The biggest stock news of the day though was Goldman Sachs beating profit estimates by raking in $4.95B in the Q. More surprising than Goldman’s success under the Obama administration was the Streltsys’ profitability during the reign of Ivan the Terrible, the benefits earned by the Imperial Guard during the Napoleonic era, and Haliburton’s favorable business wins during Dick Cheney’s vice-presidency. Goldman’s revenue was mostly inline and their outperformance was caused by putting aside only $16B for bonuses. The pay ratio dropped to 38.5% which means the average worker will be forced to scavenge with only a $500k bonus and with the way the dollar is dropping, that means these poor Goldman employees will only be able to buy one Maybach and 3 nights with Charisma Cappelli (though to be honest, if all 32k employees had 3 nights with young Ms. Cappelli, she may get a little tired, so to those Goldman employees reading this out there, try to be in the first 1k if possible).
As for small stocks, HAFC continues to love it’s long time shareholders as it erupts for the second day in a row on no news. As stated yesterday, TBV is somewhere around $3.60 so this stock has plenty of room to move up, but this is very speculative as Money McBags trusts that TBV number about as much as he trusts politicians, Mexican water, and 35 year old virgins. Also, anything that has recently risen, like RICK, is selling off faster than Rachel Uchitel’s 10 minutes of fame. This is going to present some buying opportunities for the better companies. Over the past several weeks Money McBags has mentioned several companies he thought were solid but had run up a little too much (CRUS, NTRI, TMRK, heck even INTC) so use this sell off wisely to re-evaluate and make some smart decisions like the guy who married Christina Hendricks. Oh yeah, a big shout out to When Genius Prevailed reader Matthew who has nailed NLS like a 19 year old girl in her first Monsters of Cock video. Kudos on that pick.
Hide the women and children because the market is coming back with a vengeance, like Dirty Harry Callahan or Don Knotts on Three’s Company. The market appears to be determined to show all of the traders who manufactured complex derivitaves such MBS, ABS, and plain BS, that financial engineering can only keep it down for so long as eventually people have to consume. The big news is that manufacturing continues to improve as inventories which were cut to bare bones minimums (and at a minimum, I would bone a bare Eva Wyrwal with my inventory) are now starting to be replenished. China’s manufacuring grew the fastest it has grown in 5 years which is great news for the lead paint industry but bad news for infants. In the US, manufacturing grew faster than it has in 3 years according to the ISM. This increase was driven by the stimulus spend, inventory build back, and increased sales of electronics to replace those which were broken by being thrown against the wall in disgust as the market cratered. Along with China and the US, Europe also saw an increase in manufacturing to a 25 month high causing red light sales to cease across the red light district of Amsterdam.
While positive manufacturing data is certainly good for the global economy, there is still some negative news today putting the proverbial turd in the punch bowl or the circular reference in the excel model. The dollar is dropping again as commodities rally due to cold weather driving up oil prices (and shrinking up “geysers”) and China’s manufacturing prowess spurring inflation concerns. Additionally, US homebuilding fell to a 6 year low led by a 1.6% drop in private home building. Not included in the report though was that sales of cardboard boxes have spiked as foreclosees build new houses out of cheaper materials.
In stock news, Novartis has the vision to buy more ACL, financials are rallying (and as Money McBags has said many times over the past few weeks, they are getting free money right now so should have record profits), and Money McBags favorite TMRK is soaring. TMRK is in the colocation/hosting business along with RAX and EQIX. This sector should see strong growth in the future as more companies rely on virtualization and more and more data storage is outsourced. The larger global trend (other than reality TV, string theory proponents, and flash your co-workers Wednesdays) is cloud computing, where all of one’s programs, files, and downloaded spankwire videos will be hosted in a “cloud,” thus leaving the actual pc as just an interface. Just think about all of the data out there now and the exponential growth it will see as medical redords, MRIs, MP3s, videos, and other apps continue to multiply like rabbits after downing a week’s supply of viagra. TMRK is one of the companies building facilities to host all of this data. It is currently the smallest public player in this sector, though the sector is consolidating with EQIX buying SDXC for around 10x 2010 EV/EBITDA, and it has typically traded at a discount to peers due to the size, illiquidity, and $300MMish net debt (and no that is not a typo, they have a ton of debt as colocation facilities don’t grow on trees). Still their topline is growing 20% plus (though the growth rate has been declining as they build out new facilites, so there are some step function aspects to growth) and and they have 20% of their revenue coming from the government as they host various government websites. This government revenue gives them stability and they should be able to grow it as cyber security becomes more important and colocation actually decreases the security risks. The fact is, data storage and colocation demand is outpacing supply by at least a 2 to 1 ratio so while TMRK is not terribly cheap anymore, as it trades at 8.5x EV/EBITDA, the industry is growing and consolidating so this company should be a longterm winner, like Groucho Marx jokes and anything starring Olivia Munn.