18 years in Wall Street, left after finding out it was all horseshit. Founder/ Master and Commander: iBankCoin, finance news and commentary from the future.
Joined Nov 10, 2007
21,506 Blog Posts

A Glorious Bull Market

Triple the loss for Freddie Mac [[FRE]] means triple the fun for the banks.

Thomas Brown, a well accomplished banking analyst/philosopher, who’s work parallels those of historic men like Socrates and Hamsandwich, called the bottom in both MBIA Inc. [[MBI]] and Ambac Financial Group, Inc. [[ABK]] . Well done, Sir.

As for me, respectfully, I’d like to protest the closing price of Vulcan Materials Company [[VMC]] . According to my excel spreadsheets and diligent research into their field, it appears VMC is $30 too expensive. Cordially, I invite all shareholders of VMC to quietly exit the stock, in order to avoid minor economic hardship.

Thank you.

In addition, my bet against TCF Financial Corporation [[TCB]] has proven to be a money loser. It’s my fault. I thought the housing market was slowing. I shall re-read all of my research and attempt to be persuaded otherwise.

Apparently, I find myself saddled with lots of cancerous short positions. This, as you know, was an error by the “foul mouthed Fly.” The new, kinder, more sophisticated Fly is thinking about getting long biotechs, retail, internets and other “non-risky” endeavors.

In addition, I have many stocks on my monitor, worth sharing with you good folks, such as Auxilium Pharmaceuticals, Inc. [[AUXL]] , Valeant Pharmaceuticals International [[VRX]] , Gilead Sciences, Inc. [[GILD]] , Wachovia Corporation [[WB]] and Agrium Inc. (USA) [[AGU]] .

However, keep in mind, I am in AGU for a short term trade, whereas WB is a keeper. Longer term, it makes sense to bet on America and applaud the work of fine men, like Dick Bove and Henry Paulson.

Off to watch my favorite show: CNBC.

A Most Unfortunate Update: Bad news for us 300 point chasers. Off to watch Mr. Fast Money.

A Most Unfortunate News Tidbit: Sadly, American International Group, Inc. [[AIG]] might have missed revenue projections too, by more than 10 billion dollars. Let’s all say a prayer for the good folks running AIG, a fine American franchise.

The world’s largest insurer lost $5.36 billion in the April-to-June period, or $2.06 per share. In the same period last year the company earned $4.28 billion, or $1.64 per share.

After excluding one-time items, the loss per share came to 51 cents — much worse than the 63-cent gain that analysts were anticipating.

Shares of AIG fell more than 7 percent in after-hours trading, having fallen 80 cents, or 2.7 percent, to close Wednesday at $29.09.

AIG’s net loss included a $3.62 billion after-tax write-down in the value of what are called super-senior credit default swaps. Before taxes, this write-down amounted to $5.56 billion.

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The Difference Between Commodities and Banks

Commodity related stocks have great balance sheets, great businesses and good pricing power.

Banks have heinous balance sheets, terrible businesses and zero pricing power.

Both sectors have loads of shorts in them. Mostly, people are short commodities, due to the belief of a ‘global growth’ slowdown; whereas they’re short banks, well, because they’re banks.

The flaw in being short commodity stocks is parallel to being long banks.

Companies like Agrium Inc. (USA) [[AGU]] , CF Industries Holdings, Inc. [[CF]] , The Mosaic Company [[MOS]] and Potash Corp./Saskatchewan (USA) [[POT]] have displayed zero signs of slowdown. In no way has growth or pricing power deteriorated. Therefore, if you are betting against them, you’re either guessing or just trying to catch “a quick trade.”

On the other hand, buying banks here means you believe there will be an uptick in business, despite seeing zero signs of a respite. Again, you’re guessing or trying to catch “a quick trade.”

At the moment, everything is reliant upon the minute by minute moves of crude. However, I guarantee you, this will soon pass. Eventually, businesses are evaluated on their supply/demand statistics. In my opinion, if forced to choose, I’d stick with names like FCX , Southern Copper Corporation (USA) [[PCU]] , AGU and MOS, while avoiding banks like the plague.

Naturally, market participants are trying to catch an early turn in both sectors, hoping to be rewarded for their early entry points. But, more often than not, timing tops and bottoms is a low percentage bet. You’re better off throwing sticks of dynamite at your life savings, than mess around with banks, following 40% spikes, or shorting commodities, following a 40% decline.

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A Fly Oath

Following this post, “The Fly” will cease his foul mouthed rants, until the Dow touches 11,000 again.

In other words, I will not curse until this God forsaken market drops 600 points from here.

So, either I will be a clean mouthed poor guy, or an egregiously rich-er foul mouthed malcontent.


UPDATE: Bill Miller from Legg Mason, Inc. [[LM]] got fired from a pension fund today. Good news, as always.

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Oil Controls Your Fate

Tick by tick, oil is in control of your economic destiny.

Nothing really matters. Not earnings, economic forecasts or sentiment, just oil.

As oil weakens here, the market melts up, it’s that simple.

The quick advice is to avoid energy related names, during this sit storm. However, their valuations are extremely cheap and do not deserve to be trading at current prices. Remember, oil north of $100 is still fucking kickass for every single oil producer/driller.

For some reason, the sentiment has knee capped oil stocks to the point of mockery. Nonetheless, for now, it’s safer to wait for oil to bounce, prior to stepping in.

Agrium Inc. (USA) [[AGU]] crushed numbers by .85 cents and the stock is only up $3. Conversely, Vulcan Materials Company [[VMC]] missed by 30 football fields, and that fucker is running. I just broke a monitor, out of sheer hatred for stocks.

Freddie Mac [[FRE]] offered funny numbers this morning, which initially hurt the bank stocks. However, on the dip in oil, banks are running again.

Wake me up when this shit makes sense. I’m going to take a nap now.

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Position Update: VMC

Here’s the bear case for Vulcan Materials Company [[VMC]] :

The company is a producer of asphalt, concrete and cement in a depressed U.S. construction environment.

Major inputs include diesel fuel and liquid asphalt. Both have soared in recent months.

In addition, the company levered up into a downturn and acquired Florida Rock (think Florida real estate), effectively making matters worse. Not only is Florida Rock a drag on them, from an operating standpoint, but they are laden with debt because of it. Currently, VMC has over $3.5 billion in debt.

VMC will get hit hard when municipalities cease their infrastructure projects, due to high material cost. The fact of the matter is, most municipalities are unprepared for the inflationary storm, about to hit their tax payers. Most, if not all, pegged their budgets to the erroneous cpi index, which does not reflect the mind numbing (double digit) increases in raw materials. In short, cities and states will be forced to delay or cancel numerous projects. That will be a huge blow to VMC.

via VMC‘s earnings report:

Our earnings outlook reflects a prolonged downturn in residential construction, weakness in non-residential and highway construction activity and energy-related costs remaining at the current high levels. Leading indicators such as contract awards weakened in most construction categories in the second quarter. We now estimate full year aggregates shipments, including Florida Rock operations for the full year, to be down 2 to 5 percent versus the prior year.

During this time of weaker demand, our focus is on those aspects of the business we can control. During the first half of this year, we have reduced operating hours, maintained relatively flat unit variable production costs excluding energy-related costs and decreased cash fixed costs. We will continue aggressively managing costs in all areas. We expect higher selling prices for our products to help offset the earnings effects of lower volumes and higher energy-related costs. For aggregates, we continue to expect full year price improvement of approximately 8 percent.

Regarding valuation:

Their peers include Martin Marietta Materials, Inc. [[MLM]] , Texas Industries, Inc. [[TXI]] and Eagle Materials, Inc. [[EXP]] .

VMC is a repeat offender of missing earnings estimates, as demand and cost controls hit the company hard from every angle.

Their new guidance is for a profit range of $2.85-$3.25. However, I am very skeptical they can even hit that bottom number. I do not believe they are anticipating a drastic slowdown in municipal spending.

However, let’s say they hit $2.85. At current levels, that gives them a PE of 24. The average PE for their peers is 15x. However, that’s assuming they will hit their numbers too, which they will not.

At 15x 2009 earnings, VMC should be trading at $42. If their numbers come in short, due to a further economic slowdown, I believe the stock should trade 10x 2009 earnings or $28.

The only way VMC comes out smelling like roses is if residential real estate upticks, diesel fuel and liquid asphalt drop or the government implements an “infrastructure bailout,” allocating money to the construction of highways, bridges and tunnels.

In short, I believe none of that will occur and the stock is 36% overvalued, at current levels. With 20 million shares sold short or 18% of the float, expect large swings in the stock. Nonetheless, there is no fucking way this stock deserves to be up today, recovering from an early 6 point deficit.

Disclaimer: I am short egregious amounts of VMC.

NOTE: The conference call begins at 11 am, eastern.

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Late Night Thought

Fuck fat folks.

No offense to obese people, of course.

Coming soon to iBC: Why Vulcan Materials Company [[VMC]] is a piece of shit and who should be selling it short.

Here now Update:

VMC Vulcan Materials misses by $0.17, misses on revs; guides FY08 EPS below consensus (68.50 )
Reports Q2 (Jun) earnings of $0.93 per share, excluding divesture, $0.17 worse than the First Call consensus of $1.10; revenues rose 16.2% year/year to $1.02 bln vs the $1.07 bln consensus. Co issues downside guidance for FY08, sees EPS of $2.85-3.25 vs. $3.29 consensus.

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Market on Heroin

I just knew this shit would happen, deep down of course.

While that bitch on tv gleefully relishes in the glory of a 300+ Dow day, “The Fly” is being beaten like a thief in a militant Iranian mosque.

Who gives two fucks and a gay fiddle what I think? Go look at the tape and act accordingly.

I made my bets and now I have to live with them. However, not to jinx myself or anything like that, [[FXP]] is not down too badly.

Nonetheless, at this point, I must remain steadfast and withhold the urge to jump on the bandwagon. I missed the big day, too bad; now it’s time for me to move on.

Doing so, I intend to scalp a few quick trades tomorrow, then prepare for the next leg down. I need to get my cost basis in line and make sure the risk isn’t too high. To do so, I may need to lighten up on some positions, while bulking up others.

Believe me, days like this are not easy, being on the wrong side of the tape. The worst thing I can do right now is panic, do more dumb shit, then roll over and play dead. Slowly but surely, I will recover my fucking coin and more, then seek revenge on the assholes who bet against me.

Parting Thoughts: Fuck Whole Foods Market, Inc. [[WFMI]] and double fuck priceline.com Incorporated [[PCLN]] .

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Greetings From Romania

After crying in a filthy alley for two hours, “The Fly,” thanks to his rancid portfolio of bedeviled inverse ETF’s, packed his bags and went to Romania, yet again.

There is nothing left for me to do in America. The recession is over and the bull market is back.

Like losing at a racetrack, “The Fly” lost countless millions in “bets gone wrong,” as the banking sector healed itself overnight and dumb people started buying 2nd and 3rd homes again.

All of a sudden, the dollar is King and the yen is its bitch again. As for the euro: never heard of it.

If you are worried about the strong dollar hurting exports, you are just a worry wart. Our corporations will quickly adjust and shift manufacturing away from the “expensive” factories in China to small “cheap” villages in Africa.

Finally, the whole paradigm has shifted, whereas commodities were once stable investments; they are now subprime banks. And, as you know by looking at [[SKF]] , banks are now farms, where money is grown, harvested then sent to China.

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