The market took a breather today from its run up last week that was driven by misinterpreted news, false hope, and probably a bunch of fat fingers.  Today, the big fear is that the Euro bank stress tests were not as stringent as they should have been, a fact so obvious at the time that even your humble dick joke writer and market analyzer Money McBags told you so (and when Money McBags accepts his Pulitzer, he will be sure to thank all of you in addition to the lovely Sara Varone for the inspiration, though probably not in that order).  Only about a month and change too late, the Wall Street Journal (showing why newspapers have jumped the shark) is reporting today what we all knew back then (well, that is all of us who don’t accept headlines at face value, even if they are as heartfelt as this one).  As Money McBags said many weeks ago:

“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.”

And sure enough, investors all have their panties in a bunch today (which would be fine if investors looked like this, instead of this) because of exactly that problem (though why it is just surfacing now is more of a mystery to Money McBags than dark matter or that Hannah Montana thing).  Per the WSJ, during the Euro bank stress tests, banks reporting of sovereign debt holdings varied by the nebulous definition from the Committee of European Banking Supervisors (known more familiarly as CEBS pronounced “See BS”) with some banks not reporting holdings of subsidiaries, some banks not reporting trading portfolios, and some banks simply slapping their holdings on the tables and exclaiming “stress test this.”

There were differences in such simple things as gross and net (and really, how fucked up is any kind of measurement where “gross” has different interpretations?  Other than however you may interpret “gross” if you dare to google “blue waffle.”  How about instead of “gross”, the CEBS just says “put every fucking liability you could possibly have down, including off balance sheet conduits, CDS exposure, and drinking problems), whether to include short positions or not, and if Greek debt counted as sovereign since Greece is not likely to remain a sovereign nation for long.  The point is, there is a lot of murky shit and inter-EU exposure on EU bank balance sheets and it will only take one credit default (2 to 1 odds on Greece, 8 to 1 on Spain, and 12 to 1 on this Wayne Rooney guy who may already be morally bankrupt, of which Money McBags highly approves) for shit to fall like dominoes or any TV show Ted McGinley touches and if it does, look out below.

Other than European banks fibbing on their stress tests, there wasn’t much macro news today except for rumors of more stimulus for the US economy, this time including a $200B business tax break for new investment, $50B for infrastructure spend, and a roll of $20s to help support college education.  The proposed write-off for capital investment, will allow businesses to deduct from their taxes through 2011 the full value of new equipment purchased, such as computers, utility generators, and office equipment.   The hope is that this will spur spending on capital goods and serve as an incentive for businesses to start spending the cash they have been hoarding (though if the government really wanted to get companies to spend on capital goods, they would have Jennifer Pershing in charge of deliveries, especially if businesses require all deliveries to be in the rear).

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In the market, financials led the way down as if they had been hit by a bale of hay while Oracle rose 5%+ on news that they had lured former HP CEO Mark Hurd to serve as Co-President after relenting to his demands to have Cinemax streamed in to his office.  Of course HP is now suing Oracle for hiring the guy they fired citing that it puts HP’s trade secrets (like how to build shitty computers and shittier printers) at risk.  Finally Barclay’s was down 5%+ after naming a new CEO and continuing to suck at banking.

In small cap news today, NLS ran up 10% after suckering (Money McBags means convincing) their largest shareholder to buy $5MM worth of debt.  You all may remember the debate Money McBags had with a loyal reader in the comments section about NLS months ago when it was trading 20%+ above where it is today and Money McBags was very skeptical at the time of it having much value (which in fact it didn’t).  With incomes falling and food rationing happening, people no longer need to work out to lose weight (they especially don’t need to pay a couple grand for a Nautilus machine that just winds up as an expensive clothes hanger anyway).  While Money McBags did pimp NTRI as an interesting company to dive in to (no doubt like their consumers dive in to a chocolate cake), their management has executed about as well as the Ohio state prison system so for a play on fat people you might be forced to look at MED (and something about this company makes Money McBags feel uneasier than Roman Polanaski’s kids’ babysitter) or WTW about which Money McBags has spent less time analyzing than a chubby chaser has spent analyzing an Olsen twin.

Tomorrow Money McBags will hopefully have time for a deeper dive in to a small cap name.  He’s been busy lately trying to figure out how to increase traffic to the award winning When Genius Prevailed (though readership continues to grow by whatever is slightly less than exponentially but slightly more than flat) in his quest to hit 1MM readers (and as usual, he is almost there give or take 1MM).  So if you’re one of Money McBags’ many readers (and if you’ve read this far, you probably are, or perhaps you’re just waiting for this), tell a friend, tell a relative, but most importantly, tell Alice Eve because Money McBags would like to devote his full attention to this and keep it free (just think about the $ you all pay the sellside, or for newsletters, or for magazines when Money McBags gives you better shit than that on a daily basis).  And if you’re on the buyside, Money McBags is available for consulting on small cap names (he will even leave out the dick jokes), deciphering macro data, or performing at Bar Mitzvahs (he can do a terrific version of Hava Nagila and is known to put the “rah” in torah).  If you’re on the sellside, seeing as how Money McBags fucks your business in the ass every day and actually provides real research, you’re welcome to show some initiative and buy his services or just keep sucking at your jobs while Money McBags builds a better mousetrap.