And now it has come to this.  With the Fed set to print more dollars than there is available rag paper (though they will soon be able to use the tattered clothing of the homeless and long-term unemployed to make up for that shortage), the US Treasury issued TIPS at a negative yield for the first time in history.  Wow.

Just think about that, Investors are willing to earn a yield on their fucking INFLATION PROTECTED securities that is below indexed fucking INFLATION because either they believe in the delightful French interpretation of inflation which means they are happy to avoid protection to get it, or they realize that QE2 (and its successors QE3, QE4, and QE holy shit we’ve run out of paper) is coming and thus they are willing to give up some of that inflation protection to get any protection at all and not figuratively be left standing completely exposed and merkin-less.

Buying a negative yield TIPS to protect your portfolio for the coming hyperinflation (and of course, hyper inflation is coming because of the aforementioned QE2 and not because it googled Alaina Huffman) is like buying a can of mace filled with visine to protect yourself from muggers.  It may stun a bit, but in the end, what was in your wallet is going to be gone.  So do as the Fed wants and hurry up and get your money in to the market because shortly the dollar isn’t going to be worth anything, but just be sure to pull your money out before people realize the dollar isn’t going to be worth anything because that won’t end well either in the least fun absurdity since the Simpson Paradox (and Money McBags is not talking about this, but about the fact that the gloves didn’t fit, and yet they still shouldn’t have acquit).

Speaking of currency issues, the G20 met this weekend in an out of the way, yet highly rewarding spot that could only be reached with the help of a little man in a boat.  At the meeting, the G20 decided to try their best to avoid a “competitive devaluation” of currencies, to avoid letting trade balances get too out of whack, and most importantly, to avoid fat chicks.  The problem is that what the G20 actually committed too is looser than a diarrhetic’s stool after chugging a six pack of metamucil as members refused to be tied down to any precise metric to avoid further currency issues.  As the WSJ pointed out, the strategy to avoid currency wars simply relies on peer pressure.  So to put that in perspective, avoiding a global currency clusterfuck now comes down to reminding China that they look fat in those jeans and telling Japan that all of the other cool kids are doing it.  Seems like a plan to Money McBags.

Aside from currency issues, the only macro news today was relatively positive as sales of existing homes rose by 10% which is the biggest rise on record (no word as to whether it was also the biggest rise on tape cassette or 8-track).  The number destroyed analyst guesses thanks to a 2.4% decline in prices, record low mortgage rates, and 35 fucking percent of all sales being distressed or foreclosed upon houses.  Not including shadow inventory and shadowier data, there remains ~11 months of inventory on the market so even though the relative jump in existing home sales prices seems jizztastic, we can’t forget that the absolute sales were still more fuckawful than John Meriwether’s track record or non-rhyming poetry, as they were the 3rd worst in history.  So while the relative is nice, we need to keep abreast of the forest through the trees (or the adam’s apple through the make-up, if you will) and not lose sight of the absolute.

Finally, Ben Bernanke was out today saying regulators are looking in to the foreclosure mess as they once again prove the government is a backward looking entity.  Benny B promised to have a report out by November which will detail the policy, practices, and internal (non) controls that led to robosigners and likely robotrippers ignoring mortgage paperwork in order to get more properties in to MBS CDOs to juice up yields so every random fucking douchebag at Goldman could drive cars that run on white truffle oil and unicorn tears.  Money McBags would say he eagerly awaits the report, but as he already knows it was all Waddell and Reed’s fault, he looks at the upcoming review as just another exercise in post-crisis mental masturbation (better known as the worst 12 hours of John Bobbit’s life).

In the market, BAC took some losses as they admitted that there were mistakes in their foreclosure files including improper paperwork, missing signatures, and a severe lack of proper TPS reports.  Radio shack dropped ~7% due to weaker sales of accessories, though more surprising to investors was that Radio Shack was still even in business given that there is a little something called the internet where people can order the same shit they sell at Radio Shack for cheaper and without having to put on pants.  Finally, Office Depot rose ~7% as the CEO announced he is stepping down after settling “improper disclosure” charges with the SEC.  Those “improper disclosures” were said to include the CEO claiming Office Depot is a viable company and releasing photocopies of his hanging accessories.

In small cap news, OPEN  jumped up another ~6% and the stock is running so much it’s making Money McBags’ dick hard.  Money McBags has yet to have a chance to do a deep dive on this company but as it is trading at about a quizzillion times earnings (plus or minus Warren Buffett’s sanity) and rising faster than Jennifer Lawrence‘s popularity, it looks like a bigger short than Mark Sanford’s political career.

And for those of you who follow Money McBags on twitter (and yes he manages to fit tweets in during the day between his stock analysis, muff guessing, and booking of that NSFW room in Rome), you are aware that he mentioned DTLK earlier in the day.  DTLK is a tiny do shit company that Money McBags’ fund owned a few years ago when Money McBags used to earn income from the man.  It was one of those companies where Money McBags kept insisting to other portfolio managers that it was a piece of shit and they kept subliminally insisting to him that they liked pieces of of shit.  Needless to say, the company has been sucking more dick than Loredana Jolie on the back nine but has had a huge breakout since 10/4/10′s pre-announcement and last week’s earnings call and as we saw with ININ the other week, once a shit company like this gets some momentum and then is able to build on that, the stock usually runs.

What we have with DTLK is a $61MM market cap company that basically sells off the shelf virtualization and data storage products and solutions to businesses.  In Q3, the company grew revenue by 62% to a delicious $69MM which was basically flat sequentially (and Q2 to Q3 was flat last year as well) in a seasonal trend caused by people taking the fuck off work during the summer season and thus not giving a fuck if shit gets installed (and yes, Money McBags knows that was overly technical, but ask your IT guy for help if you need it).

But here is the interesting thing, on a similar revenue base as last Q, DTLK was able to turn their first profit since full bush was still in style.  Thanks to a $1.6MM reduction in operating expenses, the company was able to earn  $.06 per share and ~$1.4MM in EBITDA.  So one could say this company is at a ~$.24 eps run rate or a $5.6MM EBITDA run rate and this is now trading at ~19x eps and ~8x EV/EBITDA which is no longer really that interesting to Money McBags but:

1.  Guidance for next Q is $75-$80MM in revenue and ~$.09 to $.13 in eps.  Now if Money McBags takes $77.5MM, uses the 24% gross profit margin from last Q, juices up op costs by 5%, and applies the same tax rate and share count, he gets ~$11 eps.  So now we’re looking at a company with potentially ~$.45 of earnings power per share trading at ~10x and coming off of 60% growth, so that is pretty fucking interesting.

2.  They have ~1/3 of their market cap in cash.  Now when Money McBags talked with a competitor of theirs ~2 years ago, the competitor seemed to indicate that not all of DTLK’s cash is discretionary but as DTLK was busy eating a dick back then, Money McBags had more important things to worry about so never followed up on this.  Just be aware of that.

3.  Volume is spiking like Kelly Madison‘s popularity on national “Hug a MILF” day (though in the offices of the award winning When Genius Prevailed, it is always national “Hug a MILF” day when Kelly is around).  From August through their pre-release, average volume was ~11k and since then it has been ~45k with 254k shares traded after earnings last week.

That said, Money McBags still has several questions to answer such as:

1.  What is driving this 60% growth which has led to their biggest backlog ever?  On the call they said they closed an $8MM deal which was their biggest ever, so how the fuck can they repeat that (and given their guidance, they expect to get more of them)?  As far as Money McBags can tell this company has no real competitive advantage though it is in somewhat of a growing market.  So what the fuck has changed other than maybe IT spend coming back and how does that translate in to next year?

2.  What caused the reduction in operating costs?  That was where the juice was this Q in getting them profitable.  It looks like it was mostly reduced G&A and lower engineering costs (though about 1/3 of it was from a reduction of “other income”), so did they just cut down on trips to their local Rick’s Cabaret and their attempt to engineer the world’s biggest dildo, or is there something fundamentally different about their business?

3.  Why won’t Sara Underwood finally come clean about her huge crush on Money McBags?  Yeah, this has nothing to do wit DTLK, but we can all admit it is a very important question.

So look, this is the classic small company growth chart.  A good Q, followed by a break out and then that break out keeps occurring.  On top of that, the company has a good balance sheet, is completely unfollowed by the street, and volume is picking the fuck up.  Plus there are some surprising holders of this as Wellington owns ~6% and some place called Diker Management (where Money McBags bets all of the traders have fat fingers) owns ~7%.  So we missed the easy money but the break out and then plateau and then break out again is interesting and if you believe guidance and that it is not being driven by one big deal and you can get some comfort as to what is driving the 60% growth, there could still be a lot of value here.