Posts tagged pending home sales
The market rose for most of the day like the radiation readings from the Fukushima Dai-ichi Nuclear Power Plant (where engineers recently found plutonium in the soil which is either from the nuclear melt down or a broken flux capacitor) until it sagged in the afternoon like Dez Bryant’s shorts (and perhaps his bank account and credibility), as investors realized that perhaps the Middle East imploding like Chris Lee’s political career, Europe figuratively sweeping their monetary problems under a rug larger than Burt Reynolds‘ thanks to Portugal’s latest downgrade, Tokyo being more of a threat to shut down than that likely assawful Spiderman musical, and AAPL reporting a bomb in one of their distrubution centers (though it turned out to just be an employee downloading a Nicolas Cage film on a company iPad), may not bode well for the ponzeconomy™. So while Larry Summers continues to pick the remnants of the economy out of his triple chin, it is important to be more careful than Fergie‘s gynecologist (because herpes are forever) as shit still sucks in the real world. Or just buy the fucking dip. Your choice.
As for US macro news, consumer spending was up .7%, though up only .2% not including food and energy so that should make the Fed happy since they continue to believe food and energy are as relevant to consumers as old man smell is to Andrea Mitchell or carding is to Lawrence Taylor (even if Fed Governor Dennis P. Lockhart wrote “…contrary to popular opinion, Fed officials actually do eat and fill up their gas tanks.“ Of course what he left out is they fill up their gas with the tears of the poor and unfortunate, so inflate away economy, inflate away). That said, the rise in consumer spend was driven by people in California loading up on geiger counters, iodine pills, and back issues of Shanna Marie Mclaughlin‘s Playboy spread, just in case the wind blows the nuclear radiation across the ocean and they are forced in to quarantine. It was the 8th consecutive month consumer spend rose, though the rise was higher than wage growth of .3% (or 0% for the 18MM+ unemployed, discouraged, and fucking discouraged workers) which caused the savings rate to contract like the soon to be readership of the NY Times.
In other macro news, pending homesales gained 2.1% in February which beat estimates of a drop of 1% (so at least analysts would have been directionally correct had they used the absolute value sign, and yes, that was sarcasm). The index is still down 8% for the year and as soon as foreclosures, shadow inventory, cardboard boxes, and Karin Mackaliunas’ vagina are off the market, which should be sometime around 20infinity, home sales should once again start to rise (and note to Ms. Mackaliunas: Really? Money McBags can almost understand the heroin, but $.22? It does beg the question of if it was 4 nickels and two pennies, 2 dimes and 2 pennies, 22 pennies, or whatever. Though perhaps she was on her way to First CityWide).
Internationally, shit is still so fucked up that even 3 year olds have taken to the drink. Portugal may be downgraded by S&P from “kind of fucked” to “just fucking collapse already,” Germany saw something called the Green Party win power in one of their States (that state of course being the state of confusion and despair), and Italy’s 74 year old prime minister still maintains he was too old for all the sex he was accused of having by claiming, he’s not 69 anymore. In addition to Europe, the Middle East is in more disarray than the Fed’s balance sheet (but shhhhhhh, don’t tell anyone about that) or Newt Gingrch’s policy stands as not only are unified forces bombing Libya in support of the rebels but Syria is getting serious about not wanting a dictator all up in their Damascuses. Syrian forces opened fire to disperse hundreds of protesters as the government discusses repealing the decades long rule of emergency just as an emergency hits, so go figure.
In the market, EBAY announced they are buying GSIG for $2.4B after waiting until the last millisecond and hitting the bid button. They are paying a 51% cash premium for GSIG after checking the seller’s ratings and now just need to wait for GSIG to open a Paypal account to deliver payment. Elsewhere, ALU was up 10% after Goldman raised them to a strong buy based on the fact that the analyst’s coin flip came up heads and GS also upgraded NOK to buy citing a run on shitty mobile companies.
Finally, Kodak was up 6% after a US trade panel agreed to rule on whether or not AAPL and RIMM are infringing on Kodak’s patents. If Kodak is successful in this case, they say they will next bring patent suits up against Borders, subprime lenders, and Mickey Rooney, for mimicking Kodak’s patented drop in to obsolescence. That said, if Kodak wins in this suit it could bring them ~$1B which should be enough to allow them to stay afloat until their next big idea fails.
In small cap news, holy fuck did shit go awry in the ~1.5 weeks Money McBags was busy doing funbagmental research on Russia (and he stresses the funbag). EBIX continues to drop after some dude got his short on on SeekingAlpha by laying out the same case Money McBags laid out months ago only instead of dick jokes and links to Teagan Presley, they used actual data. That said, their opening line was “Winston Churchill’s famous quote, “a riddle wrapped in a mystery inside an enigma,” might as well have been targeting Ebix Inc” and loyal readers know on many occasions Money McBags has referred to EBIX as “enigma wrapped in a riddle and covered with feces,” so um, once again Money McBags is not only way ahead of the Street, but one of its few sources of original thought (and here is another original thought). As Money McBags said, a long straddle of EBIX is the only way to trade it since it is either complete fraud or worth a multiple of for what it is trading (with either scenario equally likely), so if you did that, congratufuckinglations.
In other small cap news COOL continues to run up and Money McBags told you about this trade less than three weeks and ~50% ago, so hopefully you all got yours. If shit works out, this company is probably worth ~$4.50 to $6.00 so there is still upside from here. That said, Money McBags never bought (as he told you) because he doesn’t get involved in shitty companies, even if good shit is going on. That said, they have one game which is currently working and launching in Europe and while it may be more of a one hit wonder than Young MC, John Kennedy Toole, and Estella Warren, it is fucking working.
Also, Money McBags knows he owes all of you a full breakout of KITD, and he hopes to accomplish that tomorrow (he also hopes to accomplish cold fusion and a rusty trombone from Lucy Clarkson, so take that for what it is worth). While KITD has sold off more than a Jose Canseco rookie card and their management continues to buy companies as if they will have unlimited access to equity markets, Money McBags still believes in owning companies who have 30%+ market share in markets growing 35%+, no matter how bizarre of a company it is.
2010 is going out with a bang as every piece of data beat guesses today including new claims for unemployment, pending home sales, and days until Christine O’Donnell was once again found out to be a fraud (and note to FBI agents, if you’re looking for where she may have hidden misappropriated funds, you might want to check her bush). And yet despite the flurry of good news, the market reacted with more of a yawn than if it had just read Paul Krugman’s senior thesis (titled Essays on Flexible Exchange Rates: A Love Story) or sat through the first seven hours of the play Gatz. It was a bizarre day in that macro news is hitting its apex while investors remain content to lock in their bonuses and play in the snow until the new year.
As mentioned, initial claims for unemployment fell below 400k for the first time in two years as only 388k people (to be revised up next week in the continued “hold the shock and hope for no awe” government strategy) were fired, laid off, outsourced, or attacked with a dildo last week. So break out the champagne, boil water for the lobster tails, and invite Kayla Collins over for a game of “hide the CDO,” because the economy is coming back (just don’t tell that to the 388k people who are now out of work, the ~18% of the people who are unemployed, the 8.7MM people still getting unemployment benefits, or something called the Federal Reserve Bank who thinks the economy is so fuck awful that they continue to stimulate it by buying bonds, keeping interest rates cockposterously low, and pleading for Super girl to bail them out). With only 388k workers losing their jobs a week and with ~40k new jobs being added to the economy every month, we should be back to full employment in only around negative 250 months, or by Money McBags’ calculations, 1980, so just in time for the 1981 Reagan recession. Sweet.
As always, the most interesting part about the initial claims number was that once again economist guesses proved to be less valuable than a tush turner for Tara Reid (and not because she has no ass, but because it is a stupid fucking product) as they guessed the number would be 415k, which was only off by ~10%. But hey economists, continue to use those broken models which were calibrated to work in an unconnected global economy where it took more than nano-seconds to find out that Argentina has better reality TV than the US. Really, good luck with that, let Money McBags know how it continues to not work. Money McBags is hella glad new claims for unemployment are dropping on an absolute level, but at some point, there are just fewer people to lay off and with job growth somewhere between stagnant and non-fucking-existent, Money McBags will continue to be very skeptical about the pace of the non-recovery.
In other macro news, pending home sales were up last month more than guessed as they rose 3.5% vs. guesses for a 2% rise, yet on an absolute level, they remained absolutely crappy. The index showed sales were still 5% lower than in November of last year as the last four digits of your social security number, a caricature, and a heart beat are no longer considered valid documents to qualify for a mortgage. Also today, business activity in the midwest jumped up to 68.6 from 62.5 while economists guessed it would fall to 61. As always, Money McBags has no idea what the difference between 68.6 and 62.5 is (other than 6.1), so his ability to interpret this data is about as useful as Stevie Wonder’s ability to interpret a Marcel Marceau performance. The index was driven by employment and new orders, which sounds fairly positive, especially if the orders were caused by demand for Money McBags’ new favorite t-shirt (and if you click one link on the award winning When Genius Prevailed today, or any day, let it be that one).
And the positive data didn’t stop there as flows into equity funds were positive for the first time in 8 months as investors rush to top tick the market. Net flows were a whopping $355MM which should put a major dent in the $90B that was pulled out of funds since the “flash crash” in the same way that Flavor Flav’s upcoming memoir will likely put a major dent in Phillip Roth’s potential 2011 Nobel Prize nomination (and Money McBags dares the Nobel committee to read Operation Shylock and then vote for some douchenozzle like Mario Vargas Llosa again). Not only that, but commercial real estate transactions are heating up again as Normandy Real Estate Partners and Five Mile Capital Partners put their John Hancocks on the actual John Hancock for $930MM which is ~50% above where the property was ditched in the throes of the real estate bubble bursting.
In the market, less happened today than in Tom Cruise’s honeymoon suite (except for the crying and disbelief as to what was supposed to go where) with the only mildly interesting news being that bond insurer MBIA was up ~15% after JP Morgan and Barclays dropped lawsuits around MBIA’s restructuring plans. Now Money McBags doesn’t find this interesting because the stock was up so much, rather he finds it interesting because he can’t believe MBIA is still in business. Next thing someone will tell him is that RDN, GM, and Nina Hartley are still open for business as well (umm, maybe scratch that last one). Finally the big rumor is that Groupon may go public (though Money McBags liked it better in 2000 when it was called MobShop or Mercata) after it turned down a $6B offer from GOOG and is trying to raise $950MM. With internet valuations as ridonkulous as that, Money McBags is officially putting the award winning When Genius Prevailed up for sale and won’t accept anything less than $10MM or a year of taint tickles from Erin Heatherton.
In small caps, STVI (which Money McBags pointed out yesterday) unsurprisingly fell 20% because it had been pumped more than Bobbi Starr in Ass Trap. It probably has another 50% down to go but there is something mildly interesting about it and as Money McBags said yesterday, it is worth trying to understand for when things settle. Otherwise not much happened so Money McBags will be back breaking down small cap stocks in the new year.
Writer’s note: Money McBags is 94% likely to take tomorrow off since it is New Years Eve (though he may pop in for a few quick jokes or throw them up on the twitter), his writing has been struggling a bit this week (the effort is there, really it is), nothing is going to happen in the markets, and he’d like to get his champagne on as early as possible. It has been a long year and Money McBags appreciates all of his readers for making this one of the top 700k websites in the world and growing every day. He hopes 2011 will bring more readers, more interesting stocks, and more NSFW Alice Eve nude scenes. So enjoy your celebration and Money McBags will see you all in 2011.
9/2/10 Midevening Report: Investors no longer need toilet paper as economy continues to slide along bottoms
It was a relatively quiet day in the market today as bears picked up their shorts and hoped the bad men would stop pulling their alpha after yesterday’s strong move higher left their portfolios with shrinkage. The big macro news of the day was that new claims for unemployment dropped by 6k to 472k and beat analyst guesses of 475k which would usually be grounds for a market rally, yet 472k new claims for unemployment still signal an economy less healthy than Michael Douglas’ throat (too soon?). The most unsurprising news was that last week’s 473k reported number was revised up to 478k which means the (No) Labor Department continues to fully buy in to the “hold the shock and hope for no awe” strategy. Money McBags is sure Hilda Solis, the lovely Head of the (No) Labor Department, will be able to pull herself away from Mario Lopez (and yes, that picture appears to be real) just long enough to continue to save the numbers from their final bell.
While claims were down moderately, productivity (measured by output per hours worked) fell by 1.8% even as hours worked grew by 3.5% as workers spend more of their days on chatroulette (no doubt trying to find the one girl without a penis) instead of producing whatever it is they are supposed to produce (like cars, houses, and love notes to Karissa Shannon. Dear Karissa, Roses are red, violets are blue, come lie by the beach, and bring your sister too). It was the largest drop in productivity in four years, or since the Kim Kardashian sex tape came out (and Money McBags will assume that when she recently called that cinematic masterpiece “humiliating”, she meant “delicious”) and was inline with recent analyst guesses of a 1.9% contraction but much worse than their initial guesses of a .9% expansion.
Nearly 10MM Americans continue to be unemployed, longterm unemployed, and pissed off unemployed but according to the brilliant insight of some guy named Ethan Harris who is BofA’s Head Economist (and yes, that is like being the guy who drives the clown car or the smartest kid on the short bus, but whatever), the chances of avoiding a double dip recession are pretty good because data can’t get much worse, no really, that is his logic. It’s like saying a patient with the beginning stages AIDS can’t get sicker, because he’s already got AIDS. First of all, Money McBags will start listening to guys who formerly held the post of Chief Economist for Lehman Brothers sometime around the time he starts listening to Bernie Madoff for investment advice, Joseph Hazelwood for sailing advice, or John Edwards for marital advice. But whatever. The point is, data remains bad because maybe WE NEVER REALLY MADE IT OUT OF THE FIRST RECESSION. Ugh. Dr. Harris (and I use that term loosely, like Pam Anderson uses her “charm” loosely), has it ever occurred to you that the bad fucking data signals we’re still in a recession (ex. the stimulus of course) especially with GDP trending to an unmanipulated contraction? It’s like he’s missing the forest through the trees or the other 8 guys around him at the gang bang. But hey, great job at Lehman Brothers Dr. Harris, Money McBags is sure BAC is happy to have you, but please don’t forget to turn the lights out when you leave.
But all was not negative in macro news as retail sales were up 3.3% which was better than analyst guesses of 2.5% and the result of deep discounts, a favorable comp from August last year, and heavy promotions. The biggest winners were Nordstrom up 6.3%, Limited Brands up 8%, and Zumiez up 10%, while the biggest loser was fashion. In other positive macro news, pending home sales rose by 5.2% and analysts had guessed they would fall by 1%. Money McBags has absolutely no way to interpret that number other than that either prices dropped or the boxes being used to ship retail products now count as homes. And finally, orders placed at US factories rose only .1% (and remember in yesterday’s manufacturing report new orders declined) which was slightly below analyst guesses and was driven by a drop in machinery orders and common sense. Either way, none of this macro data matters as the market awaits tomorrow’s jobs report with expectations for ~110k job losses and all the unemployment the government can dole out.
Internationally, the ECB left their benchmark interest rate unchanged while Sweden upped their’s causing initial panic among investors who didn’t realize Sweden isn’t one of the 16 countries in the Eurozone. Sweden’s economy has managed to bounce back quicker than some of their European peers thanks to strong exports, a resurgence in housing, and native Swede Caroline Winberg promoting business growth.
In the market, Burger King was up 25% after PE firm 3G Capital agreed to pay ~$3.3B to acquire them. 3G thinks they can turn the company’s fortunes around for the long term by better streamlining the franchises and by changing Burger King’s name to McDonalds. Also in M&A, DELL finally told HP to talk to the hand and dropped out of the bidding for 3Par, leaving HP’s offer of $33 a share as the winning bid in what was a more tightly contested bidding war than a “win a date with Katie Cassidy” auction. And finally, Allergan is paying a $600MM settlement for what botox did to Jenna Jameson’s face (or something like that).
Finally in small cap news, FIRE continues to rally and Money McBags has not had a chance to dive in to this company yet but they are now back to trading at a ridonkulous multiple thanks to M&A rumors in the security space. It’s an interesting company of which to keep abreast (though not as interesting as Melissa Archer is to keep abreast) as security software becomes more important and they certainly offer what seems to be a nice solution with their business network software running off of the opensource Snort code (whereas Paris Hilton runs off of snort coke). When Money McBags gets time he’d like to do a deeper dive of this company as well as the even more expensive SFSF to discuss if SFSF deserves a 100x earnings multiple (and the short answer is no, the longer answer of course would be noooooooooooo). One other small name that was up 10%+ today is SPRT and Money McBags has mentioned it before but there is something about this name that doesn’t seem right to him (besides the fact that they are not going to have earnings in the next few years). They are basically trying to get consumers to prepay for IT support so when pc owners download too many Cameron Diaz photos or accidentally download the checking account for that Nigerian Prince, SPRT technicians can remotely log in to the computer and clean up any viruses. It’s an interesting proposition, but involves getting consumers to buy a form of insurance they don’t currently buy and at a price on an annual basis that is not far off from just taking the infected computer to the Geek Squad to fix or simple buying a new one. Just some quick thoughts on small cap “S” names today (FIRE is the ticker for Sourcefire) on which Money McBags is ruminating, tomorrow perhaps Money McBags will hit the “T” names (like Taylor or Tyler if he is lucky).
It was another volatile day in the market as initial jobless claims came out and were much worse than expectations which is not surprising to anyone except for those who make those expectations. Claims were up by 13k to 472k while analysts had guessed that they would drop to 452k which means on average they couldn’t even get the 50-50 directional guess right. And as usual, claims were part of the weekly we suck at math derby (also known as “Numbers Manipulation Thursday”) as last week initial claims were 457k, so if they grew by 13k this week, that should have made claims 470k, but of course the (No) Labor Department wants to try to mitigate the fuckawfulness of the economy so they always release a slightly better number and then revise it worse when no one is paying attention. So last week’s claims were revised up to 459k and thus we get the true mathmatical equation 459k + 13k = Holy shit we’re fucked (or 472k, potato, puh-tato). The good news is that people claiming extended benefits dropped by 376k, the bad news is that number fell because the government voted to stop paying them, so um, welcome to the double dip (and not the kind where you only get bacteria), make sure you are properly supplied with canned foods, matches, and plenty of viewing material because this could get interesting. And to reiterate, Republicans filibustered a bill to continue extended unemployment benefits which is the first time this has ever happened with an unmeployment rate above 7.5% during a recession and it immediately cuts off 1.5MM unemployed people from cash flow they may need. If ever Money McBags wanted to lose an election, that is exactly what he would do, fuck the people who need help in the midst of the biggest recession in history. What wasn’t reported was that Republican Senators also filibustered dignity and common sense while proposing legislation to have unemployed people serve as speed bumps on Pennsylvania Avenue to keep drivers from going to fast.
In other US macro news, pending home sales also hit the shitter (and hit it with the force of a taco bell bean burrito slathered in extra hot sauce and Ecoli) which surprised analysts but shouldn’t have surprised readers of WGP. The pending home sales index fell to 77.6 from 110.9 because the first time home buyers tax went away which is only something that has been known for months. The 30% drop in the index dwarfed the 12% drop analysts had guessed once again proving that past performance is no indication of future performance in regression models when we live in a fat tailed economy. Finally the House passed a financial overhaul bill which will now go to the Senate for a vote on what should be sweeping changes but has been watered down more than Christina Hendricks in a wet t-shirt contest.
In addtion to macro news that was so bad not even Chris Dodd could have done something to make it worse, Goldman was further questioned by the FCIC today on their derivatives trading as relates to AIG (and as usual Money McBags would love to have the FCIC’s Heather Murren question him about the exposure of his long derivative). CFO David Vinnar was nice enough to constantly conflict himself by telling the commission that Goldman doesn’t have a “derivatives business,” but when questioned on how Goldman can call themselves a “top five derivatives dealers in the world,” he acknowledged that Goldman’s derivatives business is “a very big part of what we do.” Money McBags guesses that kind of logical fallacy or semantics masturbation is bound to happen when one talks out of their ass. Anyway, this whole thing is just theatre since if the government really wanted to shut themselves, I mean Goldman, down, it would take about 3 minutes of actual investigation.
Internationally, China is showing more signs of slowing down than Robert Byrd, as new data shows the second derivative of their manufacturing sector is likely abating. Two indexes (indices? indi? indiyouknowwhatthefuckimean) came in below analyst guesses, though still showed expansion (but that expansion is now more like from flaccid to quarter chub as opposed to full pitched tent). Tao Wang (not to be confused with Tiger Wang, Dong Wang, Peter Wang, or Wang Chung) an economist at UBS China said “economic growth is strong but momentum has peaked” and if that is true, the global recovery may need another shot of stimulus or else it could flatline worse than Gina Lee Nolin‘s acting career. In other intentational news, Spain was able to sell 3.5B of 3 year Euro bonds after promising not to default on them and promising to have Rebecca Ronda personally deliver them to all buyers along with a refreshing spanish milkshake. The fact that Spain was able to get their bonds out and not at a too exorbitant yield is a positive, though Moody’s has now placed Spain’s credit ranking on review for a possible downgrade, citing “deteriorating” growth prospects, challenges in meeting deficit targets, and the fact that no one in the country works. That said, Money McBags cares what Moody’s has to say about as much as he cares about Donald Rumsfield’s thoughts war strategy, Chuck Klosterman’s opinion on pop culture, or Aristotle’s view on the heliocentric universe.
In stock news it’s uglier out there today than it was in Barbara Streisand’s bridal suite when James Brolin went out for a smoke. One stock moving nicely up though is Ford as they announced a 13% rise in sales for the month of June led by the Ford Focus, their Super Duty F1 series, and pure luck. That said, the company announced a $4B buyback yesterday so has had good news two days in a row which currently qualifies it for the award as greatest stock ever. In other news, financials continue to sputter because there is currently less faith in the financial system than there is in Norse mythology. The Treasury department has been reducing their holdings of C which is good because the government shouldn’t own public companies, especially ones going $0.
In small cap news, ZAGG is unsurprisingly selling off after it hit $3 for no reason the other day and Money McBags broke down why the stock was at least $1 too expensive. One sector that Money McBags has liked but is getting destroyed today like a college senior’s hopes and dreams is the home health care sector. Small cap names AFAM and LHCG have been solid performers as they offer a service that is both cheaper than hospital stays and better for patients as home recovery rates are better than hospitalization recovery rates. The problem is these companies rely heavily on medicare funding and their billing practices have always been questioned.
Well today, the SEC announced they are launching an investigation in to AFAM and AMED around the companies billing more home visits to medicare than they actually made. That news is less good than waking up next to an unshaven Kathy Bates. As a result the sector is down 10% today and rightfully so, in fact if Money McBags owned any of these companies he would be puking them out like a bulimic with a vomit fetish. That said, LHCG does not seem to be part of the investigation so it could be a good time to try to pick this up on the cheap once things settle. Money McBags has always preferred LHCG in this group because they are a bit more rural than the others and therefore face less competition. That said, the market is enticing as it is growing 10%-15% a year as the population ages and home health care becomes a more ready solution. It costs medicare $132 per home health care visit vs. $6k for a hospital stay and as mentioned before, recovery rates are better at home because patients aren’t around so many fucking sick people all day.
LHCG earned $.64 a share in Q1 and gave guidance for $615MM to $625MM in full year revenues and $2.75 to $2.85 eps. With the sell off today the stock is trading at only 9x this year’s eps guidance and yet the market is growing by double digits. Revenue was up 17% last Q and guidance does not take in to account any de novo branches which only take a year to reach full margins. The company has ~$13MM net cash to still make acquisitions and the market is ripe for continued rolling up as the top 4 players are only ~10%-12% of the market. The problems are the reliance on medicare funding and the government’s ability to slash that at any time, the need for continued acquisitions, the uncertainty of any future medical liability issues (as with all health care providers), and the current SEC investigation on competitors. Still, this is a growing market and is a cheaper alternative for medicare and insurance companies that ultimately provides better service and better results so why not buy this for 9x earnings when you can? As he said, Money McBags would let this settle because the last time fudged billing fears struck the industry, these stocks got pulverized even though none of the public companies were found to be complicit. So bide your time but put this on your buy list. And to reitirate for those of you new to WGP (and if you’re new, don’t forget to join WGP on Facebook), Money McBags’ buy/interesting list consists of KIRK, KITD, TMRK, CTGX, CRUS, QCOR, NTRI, EPAX and now LHCG among others. Many of those are getting to be pretty washed out (KIRK, KITD, CTGX) and yet have nice earnings streams and solid longterm businesses so once the market is done dying, those are companies that should see positive momentum. And while the market drops, there is always WGO and ZAGG to short, or just buy TWM and watch Wall Street burn.
6/2/10 Midafternoon Report: Market runs in the late afternoon as it attempts to get home in time for Oprah
It was a relatively quiet day in the market today which is more of a rarity than a downward sloping supply curve, a funny Adam Sandler movie, or a bad picture of Olivia Munn. The market was up though as pending home sales shot through the roof, of course now someone will have to go back and fix the fucking roof so the buyers won’t back out, but those are just details. Home sales rocketed up 6% but the government first time home buyers tax credit ended in April so sales were likely more pulled forward than a lottery winner’s payout or the keg tap at David Hasselhoff’s house at breakfast. So while it is exciting that pending home sales went up, it’s way too early to suck each other’s dicks about it (though if you’re Alice Eve and it’s Money McBags dick, then it is never too early, or too often) as next month’s sales should be down appreciably, like Steven Rattner’s reputation or the mood at a suicide prevention hotline going away party. In other real estate news, mortgage applications fell for the 4th consecutive week and if you read the fucking analysis in the sentence directly before this, you will know why. And in the latest job report by some outplacement firm called Challenger, job cuts were just as bad as last month though 65% better than last year, so welcome to your new normal.
Also, Mr. Buffett went to Washington to meet with all of his GS cronies, I mean the federal government. Money McBags needs to stop getting those two confused. Buffett spoke to the Financial Crisis Inquiry Commission, or as it’s more commonly known as “Huh?” after being subpoenaed to testify about the ratings agencies and their utter failure to do anythng but suck at their jobs like a one legged long jumper. While Buffett has been selling his shares of MCO, he is still their largest shareholder so his testimony was about as unbiased as Joe Francis testifying about age of consent laws. Honestly, Money McBags finds it strange that the FCIC would give a shit what Buffett has to say about the ratings agencies since he’s not going to talk down his own book. It makes less sense than the Laffer Curve or Jennifer Connelly‘s acting career. And guess what? Buffett defended these assclowns who failed miserably at their jobs and served as bottom bitches for investment banks to manipulate the markets. To quote a CNBC article, Buffett said ratings agencies “”were wrong like everyone else” due to a widespread “bubble mentality” that believed housing prices couldn’t crash”. Wow. So let me get this straight, the ratings agencies who are paid NOT TO BE WRONG like everyone else because they are the SUPPOSED EXPERTS, fucked up just like everyone else. So riddle me this Mr. Oracle of Omaha, why the fuck would anyone pay these “experts” if they are providing the same information or reaching the same conclusions as everyone fucking else? WHAT THE FUCK ARE THEY EXPERTS IN? This is more perplexing than the fact that neither of the participants of Stocking-Huang wedding was stocking a “huang.” Money McBags knows Buffett needs to keep MCO stock propped up so he can sell it, but there is absolutely zero reason for these ratings agencies to exist, at least under the current incentive system which is more screwed up than Tiger Woods’ kids are going to be.
In international news, Japan’s Prime Minister Yukio Hatoyama resigned to spend more time cultivating his Pokemon collection. His term was the shortest by a Japanese Prime Minister since1994 when Mothra swooped down and carried then Prime Minister Tsutomu Hata back to Infant Island. With asian markets already more jittery than a nanny at Roman Polanski’s house, a change in Japanese leadership brings more uncertainty than Jamie Lee Curtis’ true gender. Japan has been mired in a decades long economic crisis stemming from a real estate bubble, low rates, and sites like the NSFW spankwire.com distributing their main export of bukakke films for free. Investors now must worry about how the new regime will handle the world’s largest public debt while securing investor confidence in Japanese issued bonds. Finally, european banks are moving money overnight to Europe’s Central Bank at a record pace as they grow more fearful of write-downs and bad loans. Euro-zone banks are doing this as they apparently view counter party risk to be more dangerous than political support from John Edwards. Now look, Money McBags is no genius (though he is likely whatever is just one notch below genius), but if banks would rather earn fewer bps on overnight funds because they are worried about lending to other banks who may have lending problems, what does that say about their own fucking balance sheets? When Money McBags sees a CEO selling company stock, he stays away from that company and when he sees banks scared shitless of lending to other banks, he stays the fuck away from that financial system. It’s like a canary in a coal mine or a turd in a punchbowl of turds.
In stock news, energy companies are rallying after being down 18% due to the Gulf oil spill and due to people realizing that their cars don’t run on wind, the sun, or Heidi Montag’s implants. Ford is moving up as well, as both GM and Ford reported stronger sales than analysts guessed. Ford’s sales rose 22%, besting analyst guesses of 16% and GM sales rose 17%, besting analyst guesses of 6%. Driving the sales increases was the fact that people no longer care about driving shitty cars. With gas prices having hovered around $3 for a year and a half, SUVs are once again becoming popular buys with sales of Chevy’s Equinox tripling and GM’s Edge moving up 43%. This just proves that people are shorter sighted than Mr. Magoo without his glasses and are only setting themselves up for more pain when the gas market is remanipulated upwards. Finally, a UBS analyst who had a neutral on JPM for 5 years finally upgraded them to a buy. Money McBags would like to applaud this analyst who stuck to his guns despite JPM being the best run large cap consumer bank in the industry. For his next trick, the UBS analyst is going to pick up technology companies and slap a hold on AAPL until they can finally show the Street that the iPod is more than a trend.
In small cap news, CTGX is flying today despite no news and average volume. Money McBags has talked about CTGX many times on When Genius Prevailed and still believes they can earn ~$.75 in 2011 when electronic medical records take off. That would be 50% growth and the company is now trading at 11x that so it is still very cheap if you don’t mind owning an illiquid company that is short term highly levered to IBM. Meanwhile, crappy casino operator ISLE announced earnings today and beat analyst guesses despite profit falling to $.15 per share from $.45 per share in last years’ fiscal quarter as Red came up on the roulette wheel more times than they expected. Revenue was down 6% to $287MM but still beat analyst guesses of $260MM and those same analysts expected a $.08 loss per share for the simple reason that ISLE’s casino’s are more run down than Madonna’s vagina and also smell a heck of a lot worse. The company managed to trim out $12MM of operating expenses for fiscal 2010 and for the fiscal year, they earned $175MM of EBITDA but they have only $90MM of cash and $1,200MM of debt which means they are trading at ~9x EV/EBITDA which is not that cheap for a debt ridden company relying on consumer spend (though to be fair, gambling consumer spend is inelastic to some degree, like Joan River’s nose). The company isn’t currently burning through cash and has a $300MM line, but they have casinos in every city to which you would never want to travel (Biloxi, Davenport, Natchez, etc.) and their properties tend to be the most run down casinos in those run down towns. Today is basically a classic short squeeze and Money McBags would avoid this stock like he avoids hitting on 16 when the dealer is showing a 4 and avoids betting on “don’t come” in a craps game or a movie involving Hannah Hilton‘s face.
5/4/10 Midafternoon Report: Monty Python to rewrite script as somebody expects the Spanish Inquisition
Timberrrrrrrrrrrrrrrrrrrrrrrrrrrrr. The market is trading down as if Europe is going to go bankrupt like John Edward’s morals or like investors think it will give them AIDS (which means Magic Johnson is happily buying today since he can’t be infected again). The news continues to be fears that even with austerity measures and a bailout, Greece is going to be more fucked than Custer at the Battle of Little Bighorn or Houston after the Houston 620. As a result, the dollar is at its one year high against the euro, though to be fair, part of that high is because 90% of dollars have traces of cocaine on them. Adding fear to Greece’s impending doom is worry that the debt contagion is spreading to the other crappy European countries about which no one cares (you hear that Liechtenstein with your alps, tax haven, and policy of neutrality?). Spain is once again worrying the markets as Spanish banks are proving to be weaker than the force carried by W and Z bosons or Tiger Wood’s “sexual addiction” excuse. Apparently two banks in Northern Spain were supposed to merge but that is now some sort of power struggle to see who gets to be in charge of the crappy loans which sounds a bit like Dustin Hoffman and Warren Beatty arguing over who gets the marketing rights to Ishtar. Along with bank issues, the country’s current unemployment rate is over 20% and considering they have like a 15 hour work week, that is fucking shocking. Spanish Prime Minister Jose Luis Rodriguez Gonzalez Ramirez Guerrero Zapatero is shocked by the speculation that his country may be facing worse fiscal problems and claimed his country has “strong solvency” and the possibilty of needing a bailout is “complete madness” before he asked reporters if they’d like to buy an unfinished church and promised he’d make them a deal, even throwing in a Shake Weight for free. The market is scared today with Europe’s debt crisis pulling a Coleman Silk and spooking investors but we were due for some consolidation so as long as you hold names you are comfortable with, don’t panic.
In US macro news, pending home sales rose 5.3% which beat guesses and reached a 5 month high. As always, this increase was driven by tax breaks for new home buyers and cardboard boxes now being included in reported home sales numbers. Also, factory orders jumped 1.3% in March and were up 3.1% when excluding transportation orders which is the biggest surge in 5 years since the great home redecoration bubble of 2005. The US macro news continues to be encouraging but we still need to see unemployment decline until we will start feeling giddier than Amanda Carrier‘s bowflex.
In stock news, everything is down so this could be a buying opportunity for real companies. Unfortunately, SIRI isn’t one of them despite putting up a quarter where they actually earned a $.01 per share profit. SIRI’s business model is more flawed than Amy Winehouse’s face or supply side economics. With the prevalence of iPods, podcasts, internet radio, and Brooklyn Decker (not clear what Brooklyn Decker has to do with this, but she is hot), there is absolutely no reason to pay for radio unless you are a fan of the great Howard Stern and when Stern retires at the end of the year, Sirius will be deader than Larry Craig’s political career. Money McBags would rather be subject to 24 hours of Celine Dion’s music while watching re-runs of Friends and having his anus waxed than go long SIRI. In other news, MRK and PFE both had good quarters as untemployed people still need to stay medicated to stave off depression, anxiety attacks, and the stench from Paris Hilton‘s vagina.
In small cap news, Money McBags is getting absolutely obliterated like Alf Landon in the 1936 election (perhaps he shouldn’t have eaten all of those cats) or Carmella Bing in Sodom 4. CRUS is getting pounded, though it has run up so much that momentum investors are likely just taking profits. This is true of most of Money McBags’ names but he is holding steady as he believes in their stories and they are not overvalued (except for maybe VMW which is a bit overvalued, but whatever). Yesterday Money McBags told all of you to watch NTRI’s Q last night and they are up 20%+ after putting up moderately better numbers than the street was expecting yet giving what Money McBags thinks is pretty good guidance. For the Q, NTRI earned $.15 per share on revenue of $159MM of revenue but they had $8MM of potential one-time marketing expenses so absent those, they would have earned closer to $.28 per share. While revenue was basically flat with last year, new customers were up 11% and new customer revenue was up 14% due to a mix shift back to more expensive products. New customers basically drive this business as they help with reactivation as recency of dropping out plays a big role in getting people to rejoin plus the weak new customer additions from the past two quarters have hurt their regular program revenues. The bad news was that their Walmart/Walgreen’s/Sam’s club retail promotions bombed worse than Michael Richards on Showtime at the Apollo. The roll out of those programs cost them $3MM in marketing expense which won’t be repeated again and was part of the $8MM excess marketing spend. Of course that other $5MM came from higher ad rates so it’s not clear how much of those are really temporary vs. a shift in demand for ads and thus persistently higher rates. The company guided to $1.02-$1.12 eps for the year and $.33-$.36 eps for next Q with moderate topline growth so they are banking on marketing spend going back down to ~29% of sales while their gross margin and op ex improvements maintaining. They are trading at ~20x that with their 20% run up today and are still pretty cheap on an EBITDA basis. They earned ~$70MM EBITDA last year but with their guidance they should slightly exceed that so call it $75MM. With $90MM cash and no debt, they now have an EV of $600MM and thus are <9x EV/EBITDA on 2010 earnings. That’s about inline with peers but pretty cheap for their cash flow business model. The stock is still 33% below its high from the beginning of the year which means they have 50% more to go to get back to where the market thought they should be valued if growth was to come back. The point is, strong growth isn’t quite here yet but they are starting to get trickling sequential growth and adding that to operating improvements gives you a stock with the potential that is now reasonably priced for a static environment. But the thing is, we know there are a ton of fat people in this country so programs like this are always going to be in demand until society stops shunning bulimia. NTRI’s diabetic targeted product is continuing to grow and apparently hiring the once delicious Angie Everhart has spiked up sales to their women’s segment. Money McBags is going to let the shorts cover today but may be buying tomorrow when this thing settles. There is plenty of room to move up while downside seems limited, that said, the stock is near fairly valued if you think their weight loss products will only have moderate growth.
It’s the jobs, stupid. Good Friday was great Friday for the economy as investors got the day off to spend their hard earned dollars on cheap imported crap from China while the Labor Department released monthly data showing 162k jobs had been created. Labor Department Secretary (though Money McBags prefers the more politically correct term Labor Department Administrative Assistant) Hilda Solis, was heard exclaiming “it’s on bitches” after the report was released and was seen vociferously taunting “I got your fucking jobs right here.” Sure the economy has lost 8MM jobs during the recession, but at this rate we will have gained them all back in four short years, just in time for the next bubble to be burst (China anyone?). Before we get more excited by the jobs report than we were to find out that the lovely Anna Paquin is bisexual, the numbers need to be looked at objectively. While 162 jobs were created, 40k were temp jobs (likely people being hired to clean out the offices of those recently laid off), 48k were temporary census workers hired to make sure people correctly fill in the boxes (perhaps they should have just hired Peter North to make a box-filling instructional video), and the number of jobs created lagged the guesses of economists. Still, jobs are fucking jobs so even if they are mostly temporary, the more people who are employed, the fewer people the government has to support (like the 16.8% of Americans who are underemployed), and the more money people will not be saving in order to buy iPads they can’t afford. So hooooooooooofuckingray. In other US macro news, pending sales of US homes rose 8.2% which is the second biggest gain on record, nudging out the “buy one get one free” promotion installed by Alan Greenspan in late 2001. Finally, the ISM services index jumped to 55.4 from 53 and above economist guesses of 54. Money McBags has no idea what this means but anything above expectations is good, unless expecations were for the number of new AIDS patients, the number of Kathy Bates nude scenes in existence, or the number of gangbangs in which your current girlfriend has taken part.
In stock news, the iPad is out which means any day now cancer will be cured, there will be peace in the middle east, and we will finally get money shots in to lesbian porn because the iPad is that fucking good. Sales of the iPad on opening weekend were stronger than Magnus Ver Magnusson after a week long double steroid cycle and analysts have upped their price targets on AAPL to what ever is a bit higher than infinity. According to reports, 300k iPads were sold over the weekend with expectations now for ~5MM sales for the year which is more than the population of Ireland, Singapore, or Paris Hilton’s pants.
In small cap news, the Apple momentum continues to push CRUS higher (Money McBags broke CRUS down again for all of you last week) while FHCO perhaps forgot to protect itself this morning and is down 4% on no news other than it has run about $1 too much. Money McBags is more short of time this week than Dennis Hopper is so he likely won’t be able to provide dick jokes or market analysis until Thursday. He may pop up on twitter now and again or be able to pop out some quick analysis Tuesday night, but for the next few days you’re all more on your own than a deep thinker at a Tea Party. Stocks for all of you to keep an eye on include TMRK and KITD so do your work and remember to have your pets spayed and neutered.