Courtesy of MoneyMcbags
Oh shit, it is on again like white on rice, stink on shit, and Black on Scholes (and for you quants, just know that Brownian motion has more than one meaning), as a flurry of blue chip companies beat earnings guesses and pushed the market higher. With the 50 day moving average now rising above the 200 day moving average the S&P has hit the fabled Golden Cross (which is kind of like the Hindenburg Omen only less fiery, with fewer McClellan Oscillators, and the exact opposite), which means technicians are expecting to be showered with returns.
Of course Money McBags believes in technical analysis about as much as the LPGA believes in letting former wood swingers on to their tour or Bristol Palin believes in condoms (or rhythm), but with HFTs controlling the market and their algorithms likely hardcoded to trigger when shit like this happens, the market could push much higher here even as ~20MM people remain out of work, foreclosures continue on (minus the technicalities), and Olivia Munn continues to refuse to do a nude Playboy photo shoot. To say Money McBags is perplexed by all of this would be more of an understatement than saying the Abacus CDO was a bit of a bad deal for investors or Moby Dick was a bit long (and Money McBags is talking about this Moby Dick, so get your heads out of the gutter). But it is what it is so enjoy the capitulation while it lasts.
Interestingly, the driver of the rally had nothing to with US macro news as the only macro news today was that import prices declined (fueled by a drop in petroleum, so prices were actually up using the “core” number that the government likes to use when it is more favorable to do so, unlike today) and applications for refis rose for the first time in 6 weeks as homeowners eagerly await robosignatures to sign off in order to refi to lower rates and take more money out of their homes to be able to buy necessities like food, clothing, and 50 inch flat screen TVs.
As stated earlier, the reason for the rally was that blue chip earnings beat expectations. JPM beat analyst guesses even though revenue declined ~10% and margins declined as they were able to channel their inner Jack Welch and manage earnings by slashing their provisioning (and if Money McBags ran a bank, first he would hire Debrahlee Lorenzana to train the tellers, and then he would move his provision for loan losses to $0 because if shit goes bad, the government will just bail him out since they already exhibited worse moral hazard than Roman Polanski driving the baby sitter home).
Along with JPM, Intel in-told (yes, it is bad pun day here) the double dip recession (or single extended dip ex. the stimulus) to eat a fat dick by posting earnings above street guesses, guiding revenue to above street guesses, and saying that they see “2011 as being a “pretty good” year for computer sales.” Of course those computer sales are being driven by emerging markets and enterprises (as they need machines to make up for laying so many people off) with “consumer demand in developed markets being a little less than we thought when we started the quarter.” In other blue chip earnings, CSX also beat guesses as freight volumes keep chugging higher.
But here is the interesting thing, while the market rallied on those numbers, two of those three stocks (JPM and INTC) actually traded down which is as perplexing as that whole tramp stamp trend. Seriously, if the numbers were so good that the market got swept up in the frenzy of positive earnings announcements to come, why the fuck did the stocks putting up those numbers sell off? Something is fishier here than Portia De Rossi‘s breath in the morning, but Money McBags guesses a rising QE2 lifts all stocks.
Internationally, Chinese exports are surging again as their trade surplus reached $16.9B thanks to the Chinese government keeping their currency down thus making their electronics, clothing, and Coke infused with pee pee (no joke), cheaper to foreign countries. This currency manipulation is fueling new global currency wars which Treasury Secretary Tim Geithner addressed on Charlie Rose’s TV show (because apparently George Lopez was already booked up) by downplaying the risks but re-iterating that this is a global issue and not just a US issue (like Madonna).
Elsewhere in the market, AAPL broke $300 a share on their way to a bazillion, WMT announced that they are going to stop discounting so much to try to help margins and hopefully bring in a more respectable clientele, and natural gas provider WMB tooted up ~10% as they announced a CEO succession plan. Also, JOE dropped 10% as David Einhorn crapped all over them in front of his minions at the Value Investors Conference where tickets to the Whitney Tilson kissing booth were completely sold out, and finally, MGM dropped ~11% after their largest shareholder said they were reducing their position, they announced a secondary offering, and they doubled down on a 12 with the dealer showing a 6.
Money McBags has more, including an analysis of a small cap stock at the award winning When Genius Prevailed.