Posts tagged MSFT
The market was relatively quiet today as investors brace themselves for tomorrow’s Labor Force Participation Rate Report, Money McBags means Jobs Report, from the (No) Labor Department which will likely be more fictitious than a James Frey memoir, a Jayson Blair news story, or Ryan Seacrest’s girlfriend (at least the girlfriend who supposedly pees sitting down).
That said, even with unheard of negative geopolitical unrest as the Middle East goes through more changes than Chaz Bono, unknown long-term effects of Japan’s nuclear meltdown as low levels of radiation now seep in to US milk making it potentially the second most harmful milk additive after Strawberry Quick, and unconscionable short-term effects of the just released NSFW Kathy Griffin topless pics which caused onlookers to go all Raiders of the Lost Ark, the market remains unflappable so a negative Jobs Report will likely be ignored more than Harry Markopolos by the SEC or full disclosure by the Polyamorous one’s heir to the reasonably priced and bought on discount throne. So while Money McBags is going to drop another ~1k words on the market today and likely another 1.5k-2k tomorrow on the Labor Force Participation Report, fell free to just click on the pics, enjoy National Cleavage Day and buy the fucking dip, because data and thoughtful analysis matter as much in this market as brevity mattered to Tolstoy or panties matter to Yana Gupta (shout out to all the readers in India, can Money McBags get a क्या क्या).
As for macro news, initial claims for unemployment benefits were released and they either dropped 6k from the upwardly revised 394k, or they rose 6k from the downwardly reported 382k of last week, depending on which made up number you choose to use as your frame of reference in the latest version of the government’s “Hold the shock and hope for no awe strategy” where data is more relative than an Alabama resident’s family tree. Basically, this week’s number was the Andy Dick of (No) Labor Department data as it can go either way. That said, this strong (or weak) number follows ADP’s March payroll data that said the economy added ~200k jobs, though sifting through the fine print of the ADP data, it turns out half of those jobs were for unicorn trainers, alchemists, and buttfors (and if you don’t know what a buttfor is, it’s for shitting), so as always, it is hard to trust the numbers.
In other news, factory orders fell .1% which was the first drop in 3 months and only an absolute value sign and a forecastable data set away from economist guesses of a .5% rise. Also, the Chicago ISM index fell from a 22 year high of 71.2 in February to 70.6 in March (and for a business barometer to be at a 22 year high in this ponzeconomy™, it must ingesting some of Charlie Sheen’s second hand smoke). The most interesting part of the data is that the employment component which likely includes future assumptions rose to 65.6 which is the highest level it has been since 1983 but the optimism was likely driven by the start of the baseball season which is the time of year when Chicagoans become most positively deluded.
There was also something released today called the Bloomberg Consumer Comfort Index which rose for the first time in 5 weeks to -46.9, so whoopee that some made up index that Money McBags cares about as much as he cares about feelings, Donald Trump’s birth certificate, or that Dancing with Stars program, went up to a lower negative number. Oh wait, what’s that? The made up number indicates a recession? Now Money McBags knows it is fictitious because if rising input prices (and this is one input for which Money McBags would pay any price), 15%+ real unemployment, and slow wage growth signal recession, then Money McBags isn’t his real name (and yes that was sarcasm).
Finally, the Fed released discount window loan records and it turns out that in 2007 BofA tapped the Fed’s discount window more frequently than Money McBags would tap this ass (though with less effervescence). Bloomberg News reporters received two CD-ROMs with the data, each containing an identical set of 894 PDF files, a character profile for an elf in World of Warcraft named Berspankme, and 7 MP3 files, all of the song Friday. As to the release of the records, JPM Chief Criminal in Charge Jamie Dimon said “I think it will make it harder for people to use the discount window in the future,” to which Money McBags responds “Good.” See, here’s the fucking deal, the discount window isn’t a fucking toy and if a bank is fucked enough to have to use it: 1. Fuck them for sucking at their jobs. 2. Investors should know what is going on since bank financials are more manipulated than Newt Gingrich’s twitter account so knowing a bank is using the discount window provides INFORFUCKINGMATION to the market. and 3. If Money McBags wanted to hear from an asshole, he would have farted, so kindly go back to bilking investors in the quiet of your own gold encrusted office.
As for international news Libyan foreign minister Moussa Koussa defected (and Money McBags can’t figure out if Moussa Koussa sounds like a rejected Dr. Seuss Character (And today Moussa Koussa, the marvelous defectee, ran away from Libya, and that cockrod Qadaffi), or the product of a smurf and an oompa loompa fucking), as NATO heads up the US’s support of Libyan rebels as a way to make sure we get our fucking oil.
Meanwhile, Europe’s recovery showed prices rising and weaker consumption, because, um, that is what happens when prices rise, people generally consume less as their fiat currency becomes more worthless than Wells Fargo debit rewards or script writing advice from M. Night Shyamalan. The problem in Europe (other than that whole hygiene thing) is that the recovery is more uneven than Halle Berry’s chest as Germany continues to at least tread water as their unemployment rate dropped to 7.1% which is the lowest since reunification while Portugal sinks as their deficit continues to get more out of hand than Nekiva Hardy at a Burger King (but to be fair, the fries were cold).
Today Portugal reported a budget deficit of 8.6% of GDP for 2010 which was well above their 7.3% target and they blamed it on changes in accounting rules such as being required to report both credits and debits, to do away with coin flips when marking to market, and to discontinue the use of floating decimal points. As a result of the outsized deficit, investors sent yields on Portugal’s 10 year bonds to new highs, which is going to make it a fuckton harder for Portugal to continue to ponzi scheme their way out of their fiscal issues (and perhaps they should auction off Liliana Queiroz with their next bond issuance to drum up demand).
In the market, not much really happened except Microsoft filed an antitrust case against GOOG, which is like the pot calling the kettle black, Nouriel Roubini calling someone a bit of a curmudgeon, or Camille Crimson calling someone a cumguzzler.
As for small caps, Money McBags wanted to point out WGO again as their valuation makes less sense than Abercrombie and Fitch’s product choices. WGO announced their quarterly results last week while Money McBags was on hiatus (more on that soon, as rumors continue to fly across the internet and Money McBags promises to address them) and it sucked more dick than George Michael in lock-up. As Money McBags has been saying, their revenue growth is done since dealers have now restocked and sure as fuck, revenue was down 4%. But it’s not just that, as dealer inventories remain elevated as they were up 7% even though WGO deliveries were down 18% and if you do the math, that means shit is not good. But here is the kicker, they earned a headline $.11 eps but said that:
“the second quarter of Fiscal 2011 was positively impacted by the results of the annual physical inventory of work-in-process recorded during the quarter, due to lower actual inventory scrap and production loss than recent historical experience, which had the effect of increasing gross profit and inventories by $3.5 million”
So if we take that $3.5MM out of gross margin, all of a sudden operating income drops to ~$550k and that flows down to $.02 in eps. Yep, 2 fucking cents which is inline with last year and taking out the one-timers from last Q, means they have earned $.12 per share in the last 6 months. So even if they somehow double earnings in the next six months (though with flat revenues, overstocked dealers, rising gas prices, and morons going to jail, that is less likely than a fat chick not swallowing), that would put them at a $.33 annual eps and the company is trading at 41x that. No really, Money McBags is not making any of this up. Shit, Money McBags wouldn’t even pay 40x for something as ridonkulous as Groupon even if all they were offering were coupons for 98% off tug jobs at the World Famous Mitchell Brothers’ O’Farrell Theatre.
Money McBags is holding to his $7.50 generous price target on WGO even though all it has done is go up on him. The fact is, not only do the numbers not support valuation, but neither does the fucking economy. Seriously, what fucking cockknocker is going to lever up to buy a gas guzzler with the Middle East in upheaval and gas prices shooting up like Barry Bonds in a contract year? The valuation is cockposterous as there is more of a disconnect between price and value than there is between Ben Bernanke’s interpretation of inflation and M2, but the good news is, there is plenty of money to be made by shorting here.
2/11/10 Two Day After Report: Is That a Pyramid in Your Portfolio or Are You Just Happy to See a United Egypt?
The market rallied on Friday as Hosni Mubarak abdicated his manipulatedly elected throne, walked out of the country like, well, like an Egyptian (yeah Money McBags fucking went there, shit, not every joke can end with a Harry Baals reference), and turned the keys to his Cairo over to the military (and nothing like a junta in the Middle East to make everyone feel better, and yes that was the sound of Money McBags punching himself in the nuts).
But it wasn’t just Egypt that rallied the market because investors also reacted positively to macro news even though macro news was more mixed than Andy Dick’s sexuality (but in Bernanke’s Ponzeconomy™ we know the only news that matters is the health of Brian P. Sack’s trigger finger, and as always, Money McBags said Pee-sack, hhuhuhuh), and to earnings even though earnings continued to more confusing and less helpful than the voynich manuscript or the word “no” to Ben Roethlisberger. That said, with the market not trading on news, fundamentals, or common sense, it is all more irrelevant than a syphilis test.
In macro news, consumer confidence reached an 8 month high as consumers finally got some hits on their diapermates profiles which made them feel much more confident about their life choices. The index of consumer sentiment climbed to 75.1 from 74.2 in January and sentiment data showed households’ perceptions of the economy and job market turned positive this month for the first time in seven years as everyone BUYS THE FUCKING RIP!!! Interestingly Olivia Wilde is hot, but slightly more interestingly, the index of consumer expectations six months from now decreased to 67.6 from 69.3, so hooray for buying the rip but oh shit for when the rip becomes a dip.
Even more interestingly though, the Bloomberg article to which Money McBags linked above contains this awesome quote from Credit Suisse witch doctors led by Chief Wiccan Neal Soss: “The sharp 0.8 percent drop in the unemployment rate the past two months is resonating across consumers’ current view and future prospects for the labor market.“ Oh Money McBags’ fucking god, did an economist really just say that? Umm, has he not heard of something called the labor force particpiation rate which has artifically pulled down the made up unemployment numbers? Perhaps they didn’t teach that in his coven. Money McBags can only suggest no one listen to anything this assclown says and that Mr. Soss and the rest of the Credit Suisse team read Money McBags’ soon to be Pulitzer prize winning analysis of the jobs report to understand its irrelevance. And note to Wall Street recruiters, how the fuck does this guy have a job?
Elsewhere, the Obama administration wants the government to have a smaller role in mortgages and gradually abolish Fanny Mae and Freddie Mac within 10 years, so only about 20 years too late. The report gave Congress three options for reducing the government’s role in supporting home ownership with those options being shrinking the government’s role in insuring or guaranteeing mortgages by limiting it to only creditworthy borrowers with low and moderate incomes, having the government as an insurer of mortgages only in times of financial turmoil, or simply telling Barney Frank to eat a fat dick (and Money McBags means that in the most figurative, non-offensive way).
Also, the trade deficit widened almost as much as the income gap or that Coco chick’s ass and hit its highest level in four months as imports from China hit record levels (who knew pee pee flavored coke would be such a big hit?). The US imported more than it exported by $40B which was inline with guesses, up 6% from last month’s $38B, and included mostly products produced cheaper than in the US such as electronics, clothes, medical devices, and anything else that isn’t just picked up off the ground and requires labor. The good news is that for the year, exports actually rose 17% (though below the 20% rise in imports) as the demand for the US’s biggest products (anger, despair, lost hope, and Brianna Banks films) hit record highs. In all though, these numbers can be interpreted a number of ways (and as always, Money McBags prefers to interpret them using modern dance) as rising imports mean that consumer spend is going up (and likely inflation, though the numbers were driven by oil, so make like Peter North and drill baby drill), while rising exports mean that the global economy is picking back up (except for you Ireland, Greece, Spain, Portugal, and anyone else tied to the Euro).
The only other interesting bit of news was that Alan Greenspan talked to the Brookings Institute which is a think tank that apparently likes to think about things that suck (because if Money McBags were running a think tank, all he would think about is Nell McAndrew and how to get free HBO) and said housing prices need to rise 10%, so it’s good to see the classics never go out of style. Lord Greenspan also said the rise in equities has created a “wealth effect” that is prompting consumers to boost spending and then added “In the last four or five months, these markets are beginning to look very much like they used to prior to the crisis” which would be great if the markets prior to the crisis hadn’t also been artificially fucking inflated and led to the collapse of the ponzeconomy™.
In the market, earnings were mixed as Expedia crashed after reporting a 30% drop in net income related to a nearly 20% increase in costs, a ginormous jump in their tax rate, and something about an undifferentiated business model with barriers to entry lower than Hugh Hefner’s balls. Elsewhere, Tata motors showed the market its tatas and apparently the market really liked them as the stock jumped 9% on a 22% increase in revenue driven by strong sales of their Jaguar and Land Rover brands. Finally, Nokia fell ~15% after announcing a deal to use MSFT software in their smart phones. In a related note, Hardees announced that RC Cola will be their drink of choice, MySpace said they will be teaming up with Napster, and M Night Shyamalan said his movies will only feature Dolph Lundgren.
As for small caps, well Money McBags broke JOEZ down yesterday in a post of its own as one of his favorite shorts dropped 25% thanks to a bad Q and common sense taking over.
And a bit of an editorial note as today’s headline was a fuck of a problem for Money McBags. He narrowed it down to the one he used and “Egypt Causes Market to Rise as if It Had Flashed its (Nefer)Titis” and put it to a vote on the twitter and with other readers and it came up a fucking tie, so he went with the runner (and that makes no sense, but whatever). So if you prefer the Nefertiti’s reference, have at it. Either way, check out the JOEZ analysis and Money McBags will hopefully have a new column out Monday night.
The market closed moderately down today as investors, gamblers, and algorithms everywhere await tomorrow’s jobs report which will likely be as telling as one of Eddie Long’s altar boys (well for the ten or so years prior to this one) because thanks to the delightful birth/death model (where the output is more hard-coded than the Kryptos sculpture) the numbers will be more manipulated than Lexington Steele’s johnson on the set of any of the Manhammer films. Look Money McBags doesn’t have a crystal ball (though if he had a Krystal Ball, he would make sure he always wore a dildo on his nose just for her*), so he has no idea if the numbers will beat or miss guesses, but he talks to a hella lot of people on the Street and in business and many of them continue to be out of work with no end in sight so Money McBags will probably ignore the number released tomorrow and stick with his actual primary research which points to job openings being more non-existent than the tooth fairy, Steve Jobs’ liver, or money shots in lesbian porn.
Speaking of jobs, new claims for unemployment beat guesses today by coming in at 445k which was 11k below the upwardly revised 456k from last week and likely at least 5k below what it will be upwardly revised to next week as once again the “hold the shock and hope for no awe” strategy by the government (which is the worst kept government secret since Valeria Plame’s cover was blown or Bill Clinton’s cigar was blown) once again rears its ugly head.
Interestingly, some people were touting continuing claims dropping by 48k as somehow being positive since it was the lowest since June but the number of people on emergency and extended benefits increased by 257k. So look, Money McBags is no labor expert (though he did wake up for just long enough during that shitacular Knocked Up movie to see Katherine Heigl‘s character give birth, so that has to count for something), and he’s also no mathemetician (though he does know the difference between Ito’s lemma and Judge Ito’s dilemma, which of course was that he had to let OJ go free), but if the number of people getting emergency and extended benefits increases by more than continuing claims decrease, doesn’t that mean that net unemployment increased? Sure it would be great if the Underground Man were right and 2+2 did not always equal 4 and thus we could all ignore numbers as if we were long the S&P, but in this non-abstract universe we live in, the laws of math hold and thus instead of saying that continuing claims dropped by 48k to try to paint a rosy picture, what needs to be reported is that all claims increased by ~210k with the largest portion of that coming from people who still can’t find work and see their skills diminishing faster than Sheyla Hershey’s chest (and one can assume her social life) or Lou Dobbs’ credibility.
In other macro news, retail sales in September beat analyst guesses thanks to back to school specials like buy one get one free, 20% off, and something called “going out of business liquidation sales.” Analysts say the increased sales were driven by consumers feeling more confident thanks to a rising stock market (Way to go Ben! Nothing like putting the cart before the donkey), better weather, and widespread cognitive dissonance. Same store sales rose by 2.8% well above analyst guesses of 2.1% and were driven by retailers geared towards teenagers as those stores were up 6.7% as teens stocked up on Twilight paraphernalia, bottled nut sweat from that Justin Bieber kid, and plenty of lipstick for the start of rainbow party season.
In international news, the ECB held rates steady, whispered sweet nothings in their ear that everything will be ok, and gently caressed them as if they were Lucy Pinder. The ECB also announced they would start removing liquidity from troubled banks which means if Money McBags were European, he would start removing his liquidity from European banks as well. Elsewhere internationally, Greek public servants went on a 24 hour strike (or as it’s more commonly known in Greece: “Thursday”) while Fitch downgraded Ireland from AA- to A+ and Money McBags downgraded Fitch from F- to completely irrelevant.
In stock news, Adobe spiked up ~11% on rumors of a MSFT take out of the company while PEP fizzled out after lowering the top end of their guidance due to currency exchange rates expected to impact top line by 1% as the US dollar loses value faster than a single female after the age of 30. Elsewhere MAR put up a decent Q but sold off by 6% as an analyst from Raymond James was unimpressed with the company’s revenue guidance for 2011 citing the effect that reduced revenue will have on leverage and the fact that he recently stayed at a Marriot and still can’t get the mold and dead stripper smell off of his clothes. And finally YHOO dropped 2% as their unsavvy investor base got their dial up internet connections to work just long enough to realize that there is a little something these days called GOOG.
In small cap stocks, MLNK, which Money McBags has covered exhaustively here on the award winning When Genius Prevailed, was sent a letter by an activist investor group basically calling management out for being a bunch of asshats (no doubt after those shareholders read Money McBags’ scathing diatribe on MLNK’s last Q after their quarterly diarrhea struck for the third time in a row). The activists rightly criticized MLNK management for basically sucking at their jobs worse than a dyslexic trying to paint by numbers and for creating less value than “just being friends.” They mentioned many of the same issues Money McBags brought up such as shitty acquistions and lousy oversight (and remember, operating costs were up due to management receiving bigger bonuses despite the company destroying more value than an Abacus CDO, well maybe not that much value, but you get the point). The reason this company remains interesting to Money McBags is due to this simple paragraph from the activist letter:
“The Company’s $174 million in cash and investments are equal to approximately $4.00 per share, and working capital on hand exceeds $220 million, or 80% of the Company’s current market capitalization. Yet the Company’s enterprise value totals just $120 million, or less than three times its Fiscal 2010 EBITDA of $46 million.”
So the company is ridonkulously cheap and in an ok market and with a management team focused on creating value for shareholders rather than making sure they can adequately tip their caddies, the stock has the potential to really run. At one point this company was on a $72MM EBITDA run rate but in just three short quarters they have managed to cut that to a $20MM EBITDA run rate thanks to new business declining, pricing discounts, and shitty acquisitions leading to goodwill write downs despite this having been a huge buyer’s market. Money McBags fully supports these activist investors who are seeking to gain 3 board seats and will even selflessly nominate himself for one of those positions so he can make sure no one gets a bonus until this company figures shit out.
And to Money McBags’ new readers from zerohedge, welcome. Money McBags hopes you enjoy the insight, analysis, and dick jokes he brings on a daily basis. So far he has enjoyed his stay on zerohedge, especially when his column rotates through the top of the page and he finds himself as lucky pierre between Reggie Middleton and some guy named williambanzai7, something for which he has always aspired (well that and to be Karissa Shannon’s thong).
*As a brief aside, Money McBags is well aware that our society is devolving in to one where good manners, civility, and common sense are becoming more passe than full bush, and Money Mcbags is also aware that he has a very silly name for which he often derides his parents as it has caused him much trouble in life, but Mr. and Mrs. Ball, if you’re reading this, (and frankly, why wouldn’t you be?) why the fuck would you ever name a child of yours Krystal? Seriously, that is so annoyingly iditiotic that it makes Money McBags’ balls hurt, and not in the good way like he imagines they would hurt after overuse by the lovely Odette Yustman, but in the bad way like a jagged catheter gone awry. Having the last name Ball and naming your daughter Krystal should be grounds for child protective services to immediately take your kids away and supply a forced vasectomy. Most of all, it leaves Money McBags to wonder if those dickholes had a son and named him Harry,
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.
There was little news in the market today as investors waited for AA’s earnings tonight as a signal of things to come as everyone knows aluminum production is what really drives the economy (and yes that was sarcasm). Without much macro news other than shit continuing to get worse with temporary census jobs ending, republicans filibustering extended unemployment benefits to further punish the people who likely had little to do with the recession (other than likely borrowing way beyond their means), and no new actresses coming out as bisexual this week, we were left with a flurry of M&A driving the market (as opposed to a flurry of T&A, which likely would have led to a strong rise).
The biggest M&A deal occured between two companies about whom no one gives a fuck, as AON is purchasing Hewitt for $4.9B in cash, stock, and old actuarial tables signed by Elizur Wright. While AON will be in flux for a bit, they should be able to immediately make use of Hewitt’s human resource and outsourcing capabilities to fire the appropriate amount of people while making sure that everyone gets a smiley face cupcake. Once done, they can further get value out of Hewitt’s consulting business by leveraging them for a business case to try figure out why the hell anyone would have paid a 41% premium of 7.5x forward EBITDA for Hewitt. Of course using their now fully owned Hewitt for that study would either be considered a virtuous circle, a vicious circle, or the least fun daisy chain since full bush was still in style.
In other M&A news, Hugh Hefner wants to take Playboy private (after years of taking it to his privates) at a 40% premium to current price, or about what he pays to the Shannon sisters. Playboy magazine sales were down 48% in Q1 as the business continues to struggle with the invention of a little something called the internet where people can now read the hard hitting and biting journalism Playboy offers for free. The company has gone through a major facelift over the past year by laying off staff, streamlining functions, and putting out bigger and more well-rounded (and very NSFW) articles. The fact is, Playboy still has a recognizable and aspirational (as well as ass-pirational) brand and now that Hefner is opening up his robe for the company, there appear to be multiple bidders including PE firms, top competitor Friend Finder, and the creepy guy in the airport gift shop. The company is definitely at a tipping point with the internet producing more free porn per minute than David Duchovny can view, but in the right hands, and with a stroke of luck, the brand could come strongly back.
In other M&A news, BP may be selling assets in order to pay for a new Gulf. The company is said to be in negotiations with Apache to divest $18B worth of some of the largest Alaskan assets in the world. Finally, JNJ is buying MEND, a company that makes a device for treating brain aneurysms in stroke victims just in time to catch the growing popularity of the KFC Double Down.
Internationally, the European Commission came out with a reform package to boost consumer confiidence from “holy fuck we’re screwed” to “at least we’re not Kazakhstan.” The package includes EU-wide measures to protect bank account holders by guaranteeing savings accounts up to 100k euro and investment accounts up to 50k euro while promising to pay account holders within seven days of the almost certain to come bank failures. Lastly, China anounced exports grew by 44% as more people sink to poverty and can only afford the cheap shit made in China.
In large cap stocks, MSFT is up on news that they are going to make it rain in the cloud computing space by teaming up with Fujitsu to invest money in the growing cloud technology sector while GOOG continues to rise after having their license renewed in China. Money McBags was told that to get their license renewed, GOOG just had to follow the chinese road rules of stopping at yellow lights, driving 20 miles under the speed limit, and using their turn signal sparingly.
In small cap stocks, NLS is up 16% on no news that Money McBags could find other than people hate making money. If you remember back in December, longtime reader Matty McSacks hypothesized that NLS was worth ~$4 per share and it was trading at $1.85 at the time. Money McBags looked in to the matter and thought those estimates seemed high since the company sells expensive discretionary items during a little bit of a recession and after a hella confusing quarterly release and a jump up, NLS has settled back to where it was at the beginning of the year with today’s run up. In their last Q, NLS trimmed their losses to only a loss of $.08 per share but their biggest segment, retail, shed 30% of their revenues as if revenue had spent the entire Q working out on a Mobia. The drop in direct business was driven by a 37% drop in credit approvals from their finance partner and while Money McBags is no Fair Isaacs, it doesn’t take Isaac Hayes to see that credit isn’t going to get better anytime soon. With the direct business lagging, gross margin dropped to 50% from 56% but thanks to restructuring, the company did away with $10MM of operating expenses which allowed them to lose only $2MM and have near breakeven EBITDA. The company hasn’t made money since 2006 and with the economy sputtering again, it’s not clear who the fuck is going to be out looking for a new Universal machine to build muscle since they won’t be able to afford to buy supplements to help maintain that muscle. The only arguments that can be made for this company are that it is trading at ~.35 of sales, they didn’t burn cash last Q, and they have ~$12MM of unrestricted cash which is ~20% of their market cap. That said, rat tails, hammer pants, and Bea Arthur will come back before this company does as gyms aren’t upgrading their equipment, people continue to get lazier and fatter, and those who used to be able to afford expensive clothes holders for their bedroom (which NLS machines invariably windup being), remember they have something less expensive called a closet and a floor. So even though the stock is up big today signalling something is happening (like potentially a big short investor getting a capital call), Money McBags would not be a buyer because the consumer remains weaker than a virgin tequila shot.
And before we go, on Friday Money McBags told you about TSYS and the opportunity it presented for a short term trade. The company was up 3.5% today (though on light volume) with IWO down ~120bps so something seems to be going on there. The company is hella cheap and while their earnings releases and segment financials are more complicated to decipher than a Rube Goldberg contraption or what the fuck your lady friend is actually saying to you, they are in growing markets and seem to be winning business. Money McBags doesn’t have a great longterm feel for the company since he doesn’t quite get the step function revenue stream of their text messaging business and why they never seem to make that next step up, but if they can really hit their guidance of $80MM-$85MM of EBITDA this year, this stock should see solid appreciation now that it has seemingly bottomed.
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.
5/25/10 Midafternoon Report: Volatility causes market to go up and down faster than a time constrained fluff girl
The markets sold off hard again today until the late afternoon with the the sell off being caused by Europe going to zero, financial reform, and now fucking North Korea dropping a turd in the proverbial kimchee bowl, and the hardness being caused by the market having grabbed a workout with Amanda Carrier. So la-di-fucking-da. With Kim Jong Il apparently getting his Napoleon complex on and dropping a South Korean warship like a diahrreatic drops logs (that is with ease and aplomb), the markets have more to worry about than a parent who sends their kids for music lessons at Gary Glitter’s house. It is ugly out there today (and not Lady GaGa ugly, but Amy Winehouse on crack sprinkled with a bit of Tina Yothers ugly) and Money McBags’ screen was redder than a baboon’s ass with a deep and gaping anal fissure for most of the day. So what is an investor to do other than hide under their desks and dream of long walks on the beach with Melissa Giraldo while hoping the bad man leaves them alone? If Money McBags had the answer, he would certainly let all of you know, but for now, he is hedging the volatility and waiting for things to settle before stepping back in to names that have good long term trends and are right now just guilty by association like the cast of a Robin Williams movie (names like KO, MCD, VMW, GOOG). The market could really go either way at this technical level and while Money McBags is a very cunning linguist, he is not clairvoyant and thus does not want to bet on what will win in the current pissing match between bad macroeconomics and reasonable company fundamentals.
In US news, consumer confidence was up today to it’s highest levels since May 2008 when it was caught doing lines in a Hollywood bathroom with Lindsay Lohan. Americans are now rosier about job prospects as longterm unemployed people can no longer pay for phone service and thus have dropped off of the radar of people running these surveys. Adding to the optimism is the complete lack of global perspective by US workers who think “european” is just something you say to your friend at the urinal next to you. Also, LIBOR in dollars is spiking like it is Karch Karily after a health dose of PEDs. The dollar Libor-OIS spread which is a gauge of banks’ reluctance to lend widened to the most since July and signals that banks are questioning the viability of their peers like a young Michael Jackson used to question the viability of Marlon. And making matters worse is that the VIX continues to shoot up and investors have to hope that it is using one of Magic Johnson’s needles and thus will soon die down. Also, housing prices fell last quarter according the Case-Shiller report and fell sequentially for the month but were up modestly year over year. So taking whatever metric and time frame you choose to use, housing prices were about as robust as Detroit’s economy or Sarah Palin‘s vocabulary.
Internationally, shit is still all fucked up with Europe’s economy sinking like Angela Merkel’s neckline before a night out with the Bundestag and all investors can do is hope to grab on to some floatation devices to avoid sinking. Spain and their banking system are sparking fears today with regional bank Cajasur having been bailed out yesterday and who knows what to be bailed out tomorrow leaving Spain’s banking system under more fire than the Spanish Armada at Gravelines in 1588. There is real fear that insolvency could spread like herpes in the Kardashian family and if that happens, not even extra strength Valtrex will be able to save the Europe’s economy. Of course today, North Korea has slapped their tiny penises (or is it peni? Can someone exhume William Safire and ask him?) on the table to take part in the global cock off to see who can fuck shit up the most. After South Korea finally picked out the right stationary and calligrapher, they formally accused North Korea of sinking one of their warships in an incident that happened back in March. South Korea also relisted North Korea as their “principal enemy” knocking forks, Don Rickles, and Yonggary down on their list. In return, North Korea has suspended any interaction with their neighbors to the South, banned South Korean ships from territorial waters and air space, and taken out an ad in the Rodong Sinmun calling South Korea a bunch of “chodes.” While this is not good news, Money McBags could give a shit if North and South Korea want to go to war, stop talking with each other, or have a fucking pillow fight. What Money McBags cares about is the markets and as long as this threat of war doesn’t stop sweat shops in Seoul from banging out willy warmers, he will blissfully ignore this hissy fit and assume everything will get better.
In stock news, GS is about the only thing up big today as investors fly to the safety of the US government. Other financials continue to trade down as new legislation may require them to raise more reserves. spin off their profitable derivatives desks, and stop being such dicks. In other stocks, DELL announced plans for an iPad rival which they are tentatively calling “failure” and Microsoft announced a management shake-up with the head of their entertainment division “retiring,” no doubt to spend more time with his Zune. With MSFT lagging Apple, Google, Nintendo, and the abacus in developing consumer products people actually want to buy, hiring someone with vision is going to be key for MSFT to grow back to a market leader. Finally Autozone is up 5% today after reporting numbers better than estimates due to new store openings and higher demand for auto parts. They expect continued strong demand for replacement parts as fewer people are buying new cars since it’s not necessary to drive to one’s living room which is where 20MM people now work.
In small cap news, KITD is getting pummeled again today. Money McBags can’t defend this stock anymore as he has said everything he can say. He is going to hold on to his shares and just not pay attention to the price in this volatility. Either their A/R are fucked or they’re not and if they’re not, this stock is easily a double from here. Also, CTGX which Money McBags has blogged about many times and which he puked out the day of the “flash crash” may have bottomed out today as it is up in this tape. The company is trading at ~10x Money McBags’ fiscal 2011 EPS which implies 50% growth. Their upside relies on government spending on electronic medical records and even if Europe falls in to the ocean and North Korea taints South Korea’s kimchee supply, the US government is still going to be doling out billions of dollars to get EMR up and running. So CTGX’s main IBM outsourcing business may come under fire in a bad economy, but EMR should help pull them through. There’s a lot of Y2K about this company, but luckily, we’re about to start the medical Y2K and they should post impressive earnings. Money McBags is likely going to buy back when shit settles down a bit. Right now low liquidity names scare him more than seemingly hot chicks with adam’s apples.
The market is up today as sales of new homes were up 27% blowing past analyst guesses and rising by the most in five decades which is so long ago that baby boomers were still in grade school, man had yet to reach the moon, and full muff was still in style (like the very very NSFW 1561). Sales were spurred by the government tax credit which runs out next week, milder weather, and improved construction techniques. Additionally, orders for US manufactured durable goods were strong excluding the drop in commercial aircraft (no pun intended). Taking out transportation (and if you are going to take out transportation, be sure to grease it up with plenty of oil at dinner if you want to make sure you get a proper ride later on), orders rose by the most since December 2007 when the sale of wrecking balls spiked during the “Make Detroit Beautiful” phase of the recession. Driving up orders for durable goods was business spend on computers and electronics as companies are either gearing up for the recovery or trying to get enough computing memory to store all of the videos they have been downloading from spankwire. And the SEC is back in the news today as Goldman is choosing to press their luck (no whammies, no whammies, and stop) rather than settle with them over fraud allegations and a report is out showing SEC regulators spent more time downloading porn than they did trying to actually, you know, regulate the fucking markets (though if they were doing it as a way to research whether Heather Vandeven was causing investors to drop their shorts and get longer, Money McBags totally understands).
Internationally, Greece is activating their bailout plan while Prime Minister George Papandreou called the economy a “sinking ship” and with the bailout he hopes to avoid the fate of the Dokos. The bailout will give Greece 30B euros from Eurozone countries, another 15B from the IMF, and free two for one coupons at their local Red Lobster. The Greek requested bailout is the biggest test for the Euro since it had to guess French Economic Minister Christine LaGarde‘s gender. With the premium on Greek 2 year bonds approaching the premiums on both Pakistani bonds and Lindsay Lohan‘s life insurance, Greece needed to finally cry “theios” and get the aid promised them. Of course getting the aid may be a lot harder than asking for it as German politicians are wavering on their desire to bailout Greece citing Greece’s manipulation of economic statistics, the language in the EU treaty which forbids bailouts, and the potential for any funds to help energize Nia Vardalos’s movie career (though we hear she is working on a new movie titled: My Big Fat Greek Debt Spreading).
In stock news AMZN beat forecasts but like other tech companies, guidance was a bit lacking. Revenue guidance for next Q was $6.1B to $6.7B and analysts guesses were more in the middle than lucky Pierre at $6.4B so the Street is worried they could miss. That said, AMZN earned $.66 per share which beat analyst guesses by $.05 thanks to a 46% increase in revenue as people still hate going outside to buy shit. It will be interesting to see how long it takes for the iPad to make the Kindle obsolete and thus put further strain on AMZN stock. Also, MSFT put up a nice Q as sales rose 6% and net income was up 35% thanks to Windows 7 and businesses starting to spend again. That said, the Street was hoping for better growth, especially after INTC’s numbers, and as a result MSFT is trading down off of a pretty stellar quarter for them. Money McBags hates everything about Microsoft from their clunky operating system which allows in more Trojan Horses than Troy and more viruses than Paris Hilton‘s vagina to that stupid fucking paper clip that pops up in word everytime one mis-hits one of those F keys, but the cycle should be good for them and they are relatively cheap at around 12x 2011 estimates. So Money McBags bought a little in this dip and is going to try to get a quick 10% before puking it out like a KFC Double Down.
In small cap news, RICK had a big day yesterday on no news. Two weeks ago they announced that March sales were up 11% with 3.5% same club sales growth and revenue for the Q up 21%. Of course it’s not RICK’s top line that we’re worried about as they have proven to be literally and figuratively extremely top heavy, it is their bottom line that needs work.
The market is bouncing around today even though GDP grew 5.7%, the fastest pace in 6 years and beat estimates of 4.7% growth. The upside was led by a restocking of inventories from their depressed levels (and inventories were more depressed than Kathy Griffin’s bikini waxer the time she ran out of rubber gloves). The change in inventories accounted for 3.4% of the growth with purchases of equipment and software up 13%, negating the 15% drop in commercial construction because building cardboard boxes is so much cheaper than actual homes. So the question becomes is this a one quarter inventory rebuilding and stimulus induced anomaly or are we really on the way to a recovery? In the delightful Elisabeth Kubler-Ross’s model on the stages of grief (and for those who missed Ms. Kubler-Ross’s induction into the National Women’s Hall of Fame in 2007, the finger sandwiches were to die for), the economy has passed steps one and two by moving past denial (we are definitely fucked) and anger (openly calling for Dick Fuld to have his dick folded) and is now in the bargaining stage (please hire me, please, please). Unfortunatley the next stage is depression, which hopefully isn’t caused by another market crash when inventories fail to turn and/or by China’s bubble bursting like Christina Hendricks’ bustier. Of course the last stage is acceptance and with any luck we will be accepting growth and recovery and not the realization that we are Japan circa 1989 or Taylor Rain‘s lovely backside in her brilliant performance in 2004′s much overlooked film, Apprentass.
What is most concerning to Money McBags is that the market has been selling good news and is trading down now that the expected results are coming in much better. Of the 195 companies in the S&P 500 that have reported earnings since Jan. 11, 154 have beaten analysts’ estimates, according to Bloomberg data. That is an amazing stat and yet the market rally seems to have fizzled out like Lindsay Lohan‘s singing career (and acting career, and pretty much anything other than her whoring career, which actually makes us all winners).
The other big news of the day is that Ben Bernanke was confirmed by the Senate for another 4 year term by a 70 to 30 vote. The thirty who voted against him also voted for Mountain Dew in the Pepsi challenge, Curly Joe as their favorite of the 3 Stooges, and Anna Karenina as their favorite Tolstoy novel. Money McBags is a Bernanke supporter and thinks he has done a perfectly reasonable job as Fed Chairman, so kudos and huzzah for the Senate who took a wide stance and voted bi-partisanly on this one.
In stock news, MSFT earnings were up 60% thanks to Windows 7 and a little something they refer to as a “monopoly.” They beat estimates by $.15 by earning $.74 per share and promised that with earnings like this Bill Gates may finally be able to move out of his mother’s basement. Amazon also put up a huge quarter with sales rising 43% and earnings coming in at a robust $.85 per share, well ahead of the $.72 estimates. They also announced a $2B share buyback which boggles the mind considering that they are trading at 50x next year’s earnings and with the iPad coming in to the market and potentially taking share away from the Kindle. Why a commodity business with low barriers to entry should trade at 50x is beyond me, but then again, so is M-theory and all of it’s absurdly thought out 11 dimensions.
In small cap news MED and ZAGG continue to trade down while EBIX gives back some of their gains from yesterday. CRUS is also down despite their better than street guidance yesterday and run of analyst upgrades today. Money McBags did dip his toe into the CRUS waters yesterday (and it was delightfully stripper piss warm) and buy a small position so go buy some iPhones. Next week promises to be a wild week in the small cap space with more earnings announcements than Jack Nicholson has chins, so enjoy your weekend and be prepared.