Posts tagged NFIB
The market rose for the 7th straight day (and the day was so straight that it wouldn’t even look at other days of the same gender, and yeah, that means you Thursday) as earnings continue to be relatively decent (until the speedboat effect of rising input prices catches up with them next Q, which is nowhere near as fun as the motorboat effect catching up with Katie Price, but it is what it is), the Fed both hinted that QE2 was a success (because the paper portfolios of rich people are now higher giving them more fake money they eventually won’t spend, so good on QE2) and that there may be no QE3 (because they’ll call it QE2 Lite, the alliterative QE Cubed, or simply “Suckers”), and Ben Roethlisberger didn’t rape anyone.
With the market now passing levels it hasn’t seen since unemployment was half of what it is today, home prices were worth 20% more, and Jenna Jameson still had a career (and her original facial structure, because really Jenna, how the fuck did you turn this, into this? It’s more bizarre than getting killed by a knife wielding bird at a cockfight since the only thing one usually needs to be worried about in a cockfight is getting poked in the eye), one has to wonder at what point having people with income and real wealth will matter or if the economy can leap ahead of where it was despite more than 8MM fewer people contributing. Of course, all of that is irrelevant because as long as you buy the rip, all should be good (as long as you sell before you get ripped).
As for macro news, the only sort of real data out today was a survey from the National Federation for Independent Businesses that showed small business confidence picked up marginally in December rising 1.5 points to 94.1. Of course since Money McBags has no idea what the 94.1 is out of (perhaps a billionity?), what the fuck the magnitude of a 1.5 move means, and why he had never heard of the lovely Anja Rubik until today (and he would solve any of her cubes, and yes, that pun had to be made), all he knows it that it is likely irrelevant. That said, the report highlighted that “Owners are not optimistic enough about the future to commit to some serious spending and hiring,” so um, Money McBags guesses the 94.1 really is out of a billionty.
In other news, the Fed continued their Winter of Discontent 2011 speaking tour as today Federal Reserve Bank of Richmond President Jeffrey Lacker (lack her? Money McBags doesn’t even know her) addressed all three students who attend the University of Delaware while Federal Reserve Bank of Atlanta President Dennis Lockhart addressed the Calhoun County Chamber of Commerce in between their Business ‘N Biscuits lunch and their History of French Wine seminar (and really?). Of course as both are non-voting members of the FOMC (the fluff girls of the Fed meetings if you will), Money McBags cares what they say about as much as he cares about who the next guest star on Glee will be (unless it’s the AIDS virus), but news is news.
In his speech, Lacker said that we can almost halt QE2 right now as the “distinct improvement we’ve seen in the economic outlook since the program was initiated suggests taking that re- evaluation quite seriously,” When asked to quantify this “distinct improvement” he has seen, Lacker simply stated: “The market is up, dickbag.” And in Money McBags’ favorite example of either positive thinking, complete lunacy, or a credibility gap bigger than Anthony Garcia serving as a yogurt spokesperson (and the thing Money McBags loves most about that story is that the woman immediately knew what the yogurt tasted like, proving practice does make perfect), Lacker said the decline in the savings rate suggests that many households have made substantial progress toward repairing their balance sheets following the financial crisis. Yeah, and it also (and more likely) suggests that people aren’t making enough money to be able afford food and gas with rising prices and thus can’t fucking save anything in this ponzeconomy™. But hey, if economists want to take a decline in savings as a positive sign for an economy still reeling from an over-extended credit bubble, then, well, buy the rip.
As for Dennis Lockhart, he shared that he thinks inflation is below the Central Bank’s comfort level because apparently the Central Bank’s comfort level is somewhere around stagflation. Lockart went on to say “For the moment, inflation, properly defined, is tame, in my view. And the rise of individual prices does not signal incipient inflation’‘ and there is so much wrong with that statement that it makes Money McBags balls hurt. First of all, “inflation, properly defined” should include the shit that people need to buy like food, gas and copies of Italy’s February GQ magazine featuring the lovely Diora Baird, so the Fed’s insistence on using “core inflation” to gauge prices is like using a rectal thermometer as a pregnancy test. Secondly, “The rise of individual prices does not signal incipient inflation?” Really? Hmm let’s see, per the definition, inflation is a “rise in the general level of prices” and incipient means “to become apparent.” So just for shits and giggles, Lockhart said “the rise of individual prices does not signal an apparent rise in the general level of prices.” So um if prices rising doesn’t signal an apparent rise in prices, what the fuck does?
Elsewhere, President Obama will ask congress for $53B for a high speed rail which would be awesome if A. We didn’t have something called airplanes and B. We had $53B to fucking waste on a piece of shit train that no one is going to use anyway. For fucksake, take that $53B and pay some fucking teachers, get sick people some fucking health care, have one hell of a night out at RICKs, or just don’t fucking spend it. Just because you can print money, doesn’t mean you have to, shit, just because Money McBags can go to spankwire, doesn’t mean he has to, well, actually bad example. But Money McBags knows why the White House wants this as GE is the leading manufacturer of diesel-electric locomotives, and who is the new Chairman of Obama’s outside economic advisers? The guy who runs GE, Jeffrey Immelt. Does anyone know if conflict of interest spelled with one “fuck you” or two?
Internationally, China raised interest rates for the third time since October as the government tries to put a lid on the rapid inflationary growth which has been driven by a fuckton of lending, massive state investment projects, and the introduction of and now rampant demand for new technologies such as the fork. A slow down in China would be worse for the ponzeconomy’s™ recovery than having to live in Stockton, CA as the US needs the growth of developing countries to make up for the lost consumption due to the 17% U6 unemployment.
In the market, commodities continued to rally with gold trading up again and copper reaching all-time highs but as commodities don’t go into making all of the shit we use and thus won’t increase final prices, there is no reason to worry about inflation (and yes that was sarcasm). In earnings news, Toyota raised their profit forecast even as profit slumped 39% in Q3 due to slow sales in Japan, the lingering effect of recalls, and cars being really fucking expensive. Also, MCD announced same store sales were up 5.3% even with US sales being hurt by the fucking weather and that sent the company up ~3%. MCD had strong growth internationally (7% up in Europe, 5.2% in Asia), in their nascent breakfast segment (McCafe and oatmeal), and finally caught the Hamburglar. Money McBags is a shareholder of MCD because as always, cheap shit with a ton of brand equity should outperform in developing markets as poor foreign people want to emulate the poor people in the US. Finally, AIG delayed their re-IPO as apparently they can’t find enough investors who have never heard of AIG.
In small cap news, boring sleepy little company DFZ announced their quarter and traded down ~9% as their gross margins were really fucking gross. For some reason Money McBags keeps writing about this company as they are fairly cheap, but then every 4th or 5th Q they blow margins like they were Briana Banks in Titsicle. Gross margin is typically around 40% for this company and it came in at a fuck awful 34.7% (down ~800bps from last years 43.1% in fiscal Q2) as they fucked up their sourcing in China by relocating from Hong Kong to the Mainland. They say this wreaked havoc on their procurement (so good planning there, was the move spur of the moment?) which caused them to have to ship their product to customers through the air to ensure on-time delivery. Given the option of fucking shareholders in the short-term to try to keep long-term business, or fucking long-term business to keep short-term shareholders, DFZ chose to keep the business and Money McBags sort of applauds that. They say this is a one-time issue (which they always say, so um, ok) and the new location will allow them to get better pricing on procurement as they can now order goods 6 to 8 weeks earlier (which will bump inventories, but whatever).
The other news is that they gave some color on their recent $14MM acquistion of Foot Petals which is a company that produces some kind premium insole for womens’ shoes usually sold in stores like Nordstroms and Dillards. They said the company earns ~$2MM to $2.5MM in annual EBITDA (so they paid ~6x to 7x), is cash flow positive, will immediately be accretive, will have only a modest contribution on 2011, and is not the “game changing” deal investors may have expected, but more of “game enhancer,” like a Sean Michaels Maximizer. They are also still looking at larger deals as they will have ~$31MM cash after the acquisition.
One more interesting thing is Mini Anden, but another is that they said they see input prices rising 8% to 12% and they plan on passing this on to the consumer. Just more evidence that inflation is here despite the Fed’s denial.
So what the fuck do we do with this company? Guidance for the last two fiscal Qs is for their usual few penny eps loss as their business is more seasonal than thong bikinis so they’ll earn ~$.71ish this year, but who the fuck cares. What is important is next year so if revenue this year ticks up 1%, they lose $5MM in sales due to cutting ties with Nautilus and Superga, and then grow 4%, they should be ~$125MM of revenue for fiscal 2012 or pretty much what they will bring in this year. So how much will Foot Petals add? In 2010, DFZ had 13% EBITDA margins so if we say they are similar to what Foot Petals should have (and why the fuck not, you got any better guesses?), that gets Foot Petals revenue to ~$19MM and thus ~$144MM revenue for DFZ in fiscal 2012. Assuming the company can hit their 40% gross margin goals (and assuming margins are the same for Foot Petals) and costs tick up to $40MM, that gets them to ~$1.00 eps and thus they are trading at ~10x that right now but with ~$3 of cash per share on the balance sheet which they may or may not spend on an acquisition. So DFZ certainly isn’t expensive, but the questions are: 1. Can they really get back to 40% gross margins or even the nearly 42% they achieved last year? 2. Will Foot Petals grow and what will the synergies be? 3. Why hasn’t the Food Network tried this to help slumping ratings (this has nothing to do with DFZ, but it is a fair question)? 4. Are they going to make another acquisition?
The current price seems reasonably cheap, especially with a $.07 per share quarterly dividend, but there is absolutely no momentum in this name so no real reason to buy it unless it just gets stupid fucking cheap which would be below $8. So if this drops ~20%, Money McBags will consider buying, otherwise there is just too much upside elsewhere on which to focus.
The market was off to the races today as if it the races were going to feature Usain Bolt taking on Sara Jane Underwood in the 100 meter dash with the loser having to run a lap in the buff. The big news of course was that Alcoa started off the earnings season by destroying analyst guesses of $.12 eps by earning a whopping $.13 per share in the last Q. That’s right, the fact that a whole extra penny (with rounding) is the difference between a down market and an up 2% market makes as much sense as the theory that gravity is an illusion or candwiches.
Making it even more ridiculous is that as ZeroHedge points out, just last month Bloomberg showed consensus analyst guesses of $.16 for AA’s Q. So with analysts lowering their guesses before the quarter, AA is now back to where it was when guesses were for $.16 so the would have been $.03 miss has been mitigated by strategic downgrades. Brilliant stuff. As the late great Kurt Vonnegut would say, “No damn cat, and no damn cradle.” Analysts are now quickly dropping their guesses on companies across the board because they only get paid when the market goes up and with unemployment benefits going away, they need to keep their jobs like Kathy Griffin needs to keep off of HDTV. That said, AA did raise their guidance for aluminum consumption for the year from 10% to 12% and revenue was up 22% despite cratering aluminum prices as a result of demand slowing down and oversupply given that aluminum is the 3rd most prevalent element in the earth, behind only oxygen and whatever medal Mr. T wears around his neck. That said, the declining prices and rising energy costs are hurting overall profitability but with foreclosures up, demand may surge as the recently homeless grab sheet aluminum to build shanty towns to be known to future generations as WhothefucklentthosepeopleallofthatmoneyVilles or for short Goldmanvilles.
In macro news today, the US trade gap widened to 4.8% or $42B, which is the largest since November 2008 and a gap wider than between the antenna on a new Apple iPhone or the gap between Paris Hilton‘s legs on a Sunday morning. Not surprisingly, a trade gap is the exact opposite of what economists had guessed and thus once again proves that “economist” is not a real job, like rap music spell checker. Imports were up 3% thanks to a 12% increase in imports from China which, as pointed out yesterday, was driven by people not having any money and thus only being able to afford the cheap shit made overseas. US exports continued to see strength, which is a bit surprising given the weakness in the Euro last Q, as they were up 2.4% which was their best month since September 2008 when the US instituted buy one get one free Wednesdays for foreign countries.
And finally, the National Federation of Independent Business (known better as NFIB or “irrelevant”) said optimism declined among small businesses by 3.2% in their monthly survey to which no one pays attention to anyway. NFIB’s chief economist William Dunkelberg (who is still smarting from his decision to leave his hosting gig at Small Business Idol to pursue other career opportunities) opined that: “Confidence is lacking and the news out of Washington is discouraging. Until this changes, don’t expect small businesses to start hiring.” He then went and stole an ice cream cone from a little kid, told his wife she looked fat in those jeans, and ordered a ton of coal so he’ll be prepared to adequately fill the stockings of everyone at the NFIB during Christmas time.
Internationally, Moody’s cut Portugal’s debt rating by two whole notches which means absolutely nothing to Money McBags as he cares what Moody’s has to say about rating debt as much as he cares what Art Laffer has to say about tax policy, Jeffrey Dahmer has to say about cuisine, or Mel Gibson has to say about anything. Moody’s dowgrade stems from Portugal’s national debt having risen sharply relative to GDP as a result of stimulus measures and the 168 siesta hour work week. Moody’s also warned that weak growth would weigh on government finances for two or three more years while Portugal warned that weak analysis would weigh on Moody’s finances for eternity. European markets are up on this news as even they realize that Moody’s is worse at their job than a eunuch sperm donor or Alan Greenspan.
In large cap stocks, just about everything was up as we move in to earnings season with INTC, C, BAC, and GOOG to report this week so hopefully analysts already lowered their guesses in order to keep the market moving. One interesting stock to note is AAPL as the company is down after Consumer Reports said it will not recommend the new iPhone 4 due to reception glitches, and Steve Jobs simply being a dick. In their defense, Apple maintains that any cellphone will lose reception if held a certain way, like in a toilet, at the bottom of Lechuguilla Cave, or up Candice Swanepoel‘s well chiseled buttocks (and Money McBags is volunteering to test that theory out) so there is really no big deal. Plus, to fix the problem, AAPL claims all one needs to do is wrap some duct tape around the iPhone where the gap in the antenna is and who doesn’t want a piece of metallic tape draped around their sleek and expensive gadget? It would almost be like fixing a tear in the Mona Lisa by putting a SpongeBob Squarepants band aid over it.
In small cap news, LHCG was down ~6% today after competitor AMED announced a shitactular Q and dropped nearly 25%. Money McBags broke LHCG down the other week after the SEC announced they were investigating AMED and AFAM for potential shadiness in how they were charging medicare for visits that may not ever have happened or visits that were unneeded. Anyway, guesses for AMED were for quarterly earnings of $1.37 per share and today they said that earnings will be closer to $1.12 which makes it almost as big of a miss as the Edsel or Glitter. Money McBags did not hear AMED’s call but it is reported they said that their client base changed and they will need to reevaluate their structure and will hold off on full-year forecasts. Now look, without further color Money McBags isn’t sure how this will affect LHCG because he has no idea what AMED means by their “client base changing” because either they stopped treating sick people (which would seem a silly thing to do for a home fucking healthcare company) or they started treating fewer sick people and thus had fewer home visits (which is a more likely scenario, especially with the SEC all in their business about charging for too many medicare visits). More concerning though is that shareholders have filed a suit against LHCG for an investigation from April into LHCG’s reimbursement procedures, so fuck Money McBags on that one.
The industry makes sense longterm, the cost savings to insurance companies are too great, and home care is simply better, so it remains a good way to play the aging population trend but there is way too much fucking noise right now for an investor without access to industry insiders to get a leg up on the billing practices. As a result, Money McBags would stay the fuck away from this sector even though a few days ago he said LHCG was an interesting longterm buy (and it still remains that way but Money McBags needs more information to be able to make a sensible decision about the SEC investigations). Anyway, with all of this uncertainty, there are easier ways to make money (like TMRK which is a great takeout candidate and is getting a boost with MSFT’s entry into cloud computing ) so keep watching LHCG but you probably want to avoid going long in the short term unless you have better contacts in the industry than Money McBags has. In times of turmoil, money can be made, but to do so, one needs to be confident that they have all of the information, so do your work here carefully.