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.
So have a good weekend and remember When Genius Prevailed is on Facebook and Twitter.