My prediction of Sears collapsing once interest rates started ticking upwards was absolutely on point.Sears report1

Published in BoomBustBlog

Bloomberg reports Jobless Claims in U.S. Rise for First Time in Five Weeks, as I ponder how all of those heretofore unemployed MBS traders that Bernanke tried to assist benefit the jobless claims number. As I explained last quarter, Bernanke's squandering of US resources for the benefit of the banking elite will have to be paid for by those who actually seek jobs in this country. The Bloomberg article is excerpted as follows:

The number of Americans filing first-time claims for unemployment insurance payments rose for the first time in five weeks, a sign further improvement in the labor market depends on faster economic growth.

Applications for jobless benefits increased by 17,000 to 361,000 in the week ended Dec. 15, Labor Department figures showed today. Economists forecast 360,000 claims, according to the Bloomberg survey median. 

The figures signal the expansion probably needs to proceed more quickly to encourage companies to hold the line on headcounts and step up hiring while Congress debates the nation’s budget and tax rates. The Federal Reserve said last week it intends to keep policy accommodative to invigorate the economy and help sustain a decline in joblessness.

“This number gets us back into the range we’ve been in really since the spring,” said Omair Sharif, a U.S. economist at RBS Securities Inc. in StamfordConnecticut, who forecast claims would rise to 360,000. “We’re not waiting to see much more improvement on the layoff side. We’re just waiting for the hiring side to get going.”

 ZeroHedge adds in as follows:

This week's data remains below the year's average, though not by much, and the trend of claims falling appears to have almost entirely stalled this year from the hope-driven moves of the previous two years.

 

  

Now, if you remember, Benjamin Bernanke was supposed to have aided unemployment by buying hundreds of billions of dollars of MBS securities, right? Yeah, I know.. WTF!!! Let's take a look at how that has worked out histoically...

 thumb image002 copy copy copy copy copy

Not only has it not worked out well historically, but the unemployment numbers spiked as soon as Bernanke admitted the buying as can be referenced in the ZeroHedge chart above, and have not truly showed a trend of abatement since, but then again, one shouldn't expect such looking at the historical trend in my chart above. If you want to see a positive trend, look at the industry that was saddled with bullshit MBS to begin with...

image005 copy copy

And there you have it, MBS purchases by the hundreds of billions that likely drive bank shares through the roof as they are unsaddled of the bullshit which they schemed so hard to peddle in the first place as unemployment restarts its upward climb, devoid of the resources that Bernanke directed towards the banks. For those who don't remember how my rant on Bernanke selling out the working class for the banking class went down, reference the video on the topic below...

And on that note, here's a group of companies (yes, another group) that we expect to get banged by this not-so-stealth bank bailout. Chief among this group is an overpriced gem that is suffering spiking expenses, flat revenue and a sad macro outlooke, for subscribers only (click here to subscribe)... File Icon Specialty Note (Consumer Retail)

image010

There will be several more reports to subscribers before the new year. Stay tuned...

Published in BoomBustBlog

Following up on the post of Tuesday, 14 August 2012, Muppets Get MASHED Once Again - Groupon Half Off Share Price Coupons Selling for 20 Cents On The Dollar!!! Groupon is now trading at $2.61 after its most recent earnings announcement. We warned pre-IPO that this stock was pure trash. Let's see how that warning panned out... (spoiler alert: free BoomBustBlog Anti-sell side research available for download below)...

Groupon charg

An 89% drop since the IPO. For those not paying attention, that's damn near all of the share price... disappeared! You could have made a fortune selling this. You may have even made a dollar or two litigation with the issuers or the company itself. Don't forget,  At least eight brokerages slashed their price targets on the firm. Where were these firms when we were warning pre-IPO? 

Here are some key highlights: Groupon restates revenue, EXACTLY as I warned just three months earlier.

  1. Monday, 26 September 2011 What's The Best Way To Profit From Groupon's IPO?
  2. file iconGroupon Revenue Restated 09/26/2011
Groupon starts trading on the Nasdaq via IPO...
  1. Sunday, 13 November 2011 I Hope You Groupon IPO Investors Got Coupons At The IPO!!! Yeah, That's Right I Was The First To Say It
Favorite hits from said documents...
Groupon revenue restated Page 1
Groupon revenue restated Page 2
Groupon Valuation redacted Page 14
 
Groupon revenue restated Page 1Groupon revenue restated Page 2Groupon revenue restated Page 3Groupon revenue restated Page 4Groupon Valuation Page 01Groupon Valuation Page 02Groupon Valuation Page 03Groupon Valuation Page 03 copyGroupon Valuation redacted Page 11Groupon Valuation redacted Page 12Groupon Valuation redacted Page 14

You know that you really don't have to follow eight brokerages to make money on Groupon. All you really had to do was subscribe to BoomBustBlog, reference For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

I have commented ad nauseum on the percieved need to do business with name brands, those who do God's work, and those who simply cannot trade - muppet masters and all - as I clearly articulated on the Max Keiser show last week.
... and on previous shows. 

Now, all of you Goldman, Morgan Stanley, et. al. lovers, don't get your muppetware in a bunch, you know that I know that you know that It Is Now Common Knowledge That Goldman’s Investment Advice Sucks???, as excerpted:

It's official, the mainstream media has turned on those "doing God's work" and come to the side of BoomBustBlog.

In case you still don't get it, the sell side research departments of these banks did not offer BoomBustBlog research to their clients. Oh no, then how in the hell can they dump their stock??? They issued glowing reports from their own analytical cum soft sales staff.

On that note, let's reminisce.... In June of 2011 I release proprietary research to BoomBustBlog Subscribers. You can now download said report absolutely free, here icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36). After reading said report, prepare for some real comedy, as reported by Dailypolitical.com:

Groupon (NASDAQ: GRPN) was downgraded by equities research analysts at Stifel Nicolaus from a “hold” rating to a “sell” rating in a research note issued to investors on Monday.

Other equities research analysts have also recently issued reports about the stock. Analysts at Bank of America (NYSE: BAC) downgraded shares of Groupon from a “buy” rating to a “neutral” rating in a research note to investors on Monday. They now have a $20.00 price target on the stock, down previously from $30.00. Separately, analysts at Benchmark Co. cut their price target on shares of Groupon from $32.00 to $28.00 in a research note to investors on Monday. They now have a “buy” rating on the stock. Finally, analysts at Goldman Sachs (NYSE: GS) reiterated a “buy” rating on shares of Groupon in a research note to investors on Thursday, February 9th.

Groupon traded down 3.20% on Monday, hitting $14.54. Groupon has a 52-week low of $14.85 and a 52-week high of $31.14. The company’s market cap is $9.376 billion.

Whoa!!! Goldman Sachs reiterated their "buy" recommendation just in time for their damn Muppet Clients to lose ~40% by the close of the market today. Go ahead, stuff those damn Muppets, fellas!For the record, in June of 2011, a full ten months ago, I made clear to my subscribers the following (as excerpted from the now free download)...

We value Groupon at $6.6bn using DCF. The current valuation is based on 10 years of revenue projections which are overly optimistic in our view.  We have forecasted revenues of $4.0bn in 2011 and expect revenues to nearly double to $7.5bn in 2012 and reach $35bn by 2020. We have assumed cost of equity of 12% and terminal growth of 3% from 2021 onwards. We have kept gross profit at stable levels and assumed operational gearing to (∆ Operating Profit / ∆ Revenue) to improve considerably. Despite these optimistic projections we were still not able to justify a valuation close to $10bn let alone $20-25bn. We only see downside risks to valuation of $6.6bn and believe that Groupon’s rejection of Google offer of $6.0bn was a mistake in first place. Google’s valuation of $6.0bn most assuredly included a premium for synergies that Google could have achieved with Groupon which would be clearly absent in the standalone entity. We see the fair value of Groupon close to $3.0-4.0bn if we assume a more realistic picture. Given all kinds of questions surrounding Groupon’s business regarding the sustainability of revenue growth, costs control and even the business model itself (i.e., the relationship with merchants) and external competition, we remain deeply concerned even on the sustainability of a successful IPO for Groupon. 

For the record, at about $3 per share, Groupon is market-valued at about $2.2 billion dollars!!!! Here are some key highlights: Groupon restates revenue, EXACTLY as I warned three months before the IPO.There's a WHOLE LOT MORE, but this post is long enough as it is. Simply download the links above, and don't forget to reference the valuation section of original forensic report. There's an early Christmas present in there for the stingy muppets!

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Published in BoomBustBlog

On or about September 12, 2012 Dr. Benjamin Bernanke, the Chairman of the US Federal Reserve, announced the 3rd round of Quantitative Easing (because the 1st two rounds worked out so well) under the auspices of attempting to reduce the unemployment rate by buying nearly a trillion dollars per year of MBS per year - ad infinitum!!! I posted the following article in response - Bernanke's Lying Through His Teeth and Not A Single Pundit/Analyst/Banker Has Called Him On It!!! The article clearly articulated how and why the man lied straight to the collective faces of MSM consuming America.

mbsvs unemployment

On September 16th, I took it upon myself to right the wrongs perpetrated by the mainstream media in not calling Dr. Bernanke and the US Fed's commented actions for the bold faced lie that it was, and streamed my own reality TV financial show, directly in front of the NY Fed, quoting data pulled directly off of the St. Louis Fed's website. For all of those who feel that there is no audience for the truth and REAL financial analysis, this short video received nearly 13,000 views and a 101:0 like/dislike ration in less than 48 hours with absolutely no promotion, production or advertising. It was simply.... the truth!!!

Now, for those who don't believe me and the machinations of this Bernanke Fed, let's simply fast forward two weeks to the present where we find interesting content...

From ZeroHedge: Fed's 'Trickle-Down' Policy Lines Pockets Of Mortgage Originators

This rally has reduced the spread between 'risky' MBS and supposedly risk-free US Treasuries to practically nothing as the Current Coupon 30Y MBS trades around 1.67%. However, where the real differential has occurred is in the spread between the risky wholesale rate that Main Street is charged on their mortgage and the government-sponsored wholesale rate they finance this debt at. The spread between wholesale and retail mortgage rates has never been higher (in absolute and ratio terms) providing a new ATM for all those banks and mortgage originators trying so hard to scrape by these days. We just assume the Fed's policy transmission-channel had modeled this trickle-down of mortgage banker bonuses (and taxes) into local Ferrari dealerships and Lafite wholesalers.

The lower pane shows the spread between the retail-facing mortgage rate that Main Street pays and the wholesale-facing cost of funds for those mortgages...

and given leverage and capital (and the now risk-free nature of MBS apparently) - perhaps a ratio of the two is more useful - and much more telling of the disconnect...


From the Confounded Interest Blog: QE3 (MBS): Mortgage Rates Decline But The Spread Is Captured by Mortgage Agencies

The results so far?

As of 9/28/2012, the Bankrate 30 year fixed rate mortgage average rose slightly after dropping on the QEternity announcement.

The spread between the Fannie Mae current coupon rate (paid on new Fannie Mae MBS) over the 10 year Treasury yield has risen to a positive spread after dipping into negative territory last week.

On the other hand, the spread between the Bankrate 30 year fixed rate mortgage average and the Fannie Mae current coupon is near an all time high indicating that the agencies are capturing rents from The Fed’s agency MBS purchases.

If the goal of The Fed is to help stabilize HUD, Fannie Mae and Freddie Mac, that is one thing. But if the goal is to lower rates to consumers, the Fannie Mae current coupon would have to fall. An alternative explanation is that lenders have captured the increased spread and not the mortgage agencies.

In the meantime, here is the subscriber content detailing the companies that we feel will be the initial victims of the Federal Reserve Bank catering to its TRUE constituency (the big money center banks) as they collaboratively sell the US worker, saver and consumer down the river.

There are four reports here - Consumer Discretionary with the remainder to be found in the Retail section. All who are interested in accessing this research can click here to subscribe. Those who have not heard of me should look into Who is Reggie Middleton?

Published in BoomBustBlog

The 2nd demo of my new Financial REALity TV show is available. The variable audio is due to the total lack of cooperation from the subject company's employees, as you could probably assume. After all, there are a few things not to be too proud of...

 steinway earnings

Subscribers, please download the full report here: File Icon Steinway Musical Instruments Note. Valuation and further analysis available by the weekend. Click here to subscribe. Non-subscribers can peruse page one below:

Steinway Musical Instruments Note - blog Page 1

This REALity TV thing has actually been very, very well recieved. More so than I thought. Here are previous episodes and related research...

  1. Reggie Middleton's Documentary-style Reality TV Show, ep. 0 - Sizzle Reel
  2. Reggie Middleton REALity TV #1: Benjamin Bernanke LIED To The World About QE3/Unemployment
  3. Reggie Middleton's REALity TV #2 - Bernanke's Bank Bailouts Blow Up Consumer Discretionary 

Related research...

file iconRetailer Preliminary Analysis 08/03/2012
Published in BoomBustBlog

No, I didn't even bother to listen to the Bernanke speech! It was a waste of perfectly good hot air. The MSM is all abuzz with the bullshit. A quick Google search for Fed QE3 reveals the cackle...

So, this is the scam story, in a nutshell - Bernanke says he will target the mortgage market to reduce unemployment by pledging to buy $40 billion USD of mortgage securities per month until a demonstrable improvement in the labor force materializes. What the F^ck!!!! So, is it just me or does everyone assume that the most common job in the US is MBS trader? Exactly how direct is the mechanism between MBS purchases and employment? Does anyone truly believe (obviously, from the links above, many actually do) that Bernanke can lift employment by buying mortgage securities? 

Okay, all bullshit aside, this is the skinny. The banks are in trouble again. Actually, they've been in trouble since 2007, but the stress seems to be approaching the acute phase again. The housing scam is once again catching up to this nation's lenders and credit gamblers. The pending downturn in the CS index will prove my point, as will the stress emanating from the inevitable break in Europe. Bernanke has come to save this market and its participants by a) buying the stuff that there is still really no market for, and b) announcing that he will do so indefinitely.

Do I sound conspiratorial? Well, mortgage rates are already at record lows, so what the hell is the purpose of trying to push them even lower, and by force at that? Oh yeah, I forgot... To increase employment. Let's not leave all of those MBS traders to fend for themselves in the unemployment line.

This is what I would do if I was Fed Chairman and I was serious about lowering unemployment - Which Bernanke is not!

 I would take the Fed's resources and purchase SBA bonds aimed at pumping cash into the small business sector, not the housing sector  which is still trying overcome the ramifications of the last bubble popping.  You see, the SBA guarantees loans to small businesses, a group which represents the single largest contributor to employment this nation has. $40 billion per month in SBA bond purchases which would be used to guarantee loans to business creating a significant multiplier effect of no less than 5x - 7x ~ around a quarter trillion US dollars per MONTH in direct small business and direct employment stimulus is like sparking a live wire in a vat of gasoline with a semtex lid - at least in terms of the potential explosiveness this would have in terms of invigorating the small business sector, hiring and within a very short order, the spiking of employment. Now, I admite that this would be blowing a new bubble, but Bernanke is trying to do this now with housing finance, no? Now I admit, the process would not be that simple, but its a whole of a lot simpler than what Bernanke is trying now - that is unless he's really not trying to boost employment... Hmmmm!!!!

The argument can't be made that the SBA loans are not that liquid either. I query, how liquid is the MBS market now?

Of course, the old Bernanke put - which has morphed and metastasized, and is now the Bernanke CDO cubed with inverse kickers - has lit a fire under the ass of stocks. As usual, fundamentals and common sense take second seat to momentum gambling and non-sense. When does the math return? When things get real ugly. This is why my team and I have been focusing on the sector that has mistakenly been seen as much stronger than it actually is - the retailers and vendors of consumer discretionary products and services!

Is The New US Consumer Consumption Bubble Primed To Pop? Yes, There's A Bubble!!!


Recent and related research

Below are three companies that probably will not do well even with Bernanke's machinations. When and if Bernanke fails, look out below.... Click here to subscriber!

Retailer Preliminary Analysis 08/03/2012
 
Published in BoomBustBlog
Thursday, 13 September 2012 12:23

Musical Chairs In The Retail Space

The latest forensic report is available for download, and it features a company with a very bleak future and an outrageous PE. This is a another simple math exercise that no seems to have done! Subscribers, look here: Retail Short Candidate Note 9/11/12 (click here to subscribe). For those who don't subscibe, s extracted from the aforelinked note:

As per the company, the operating profit declined due to higher operating expenses as illustrated below:

  • $3.8 million in severance costs
  • $1.8 million incremental in stock-based compensation
  • $1.1 million in legal and consulting costs
  • Sales and marketing expenses increased $2.2 million

The problem is, as can be seen from the nature of such expenses, none of these are of exceptional nature. These are expenditures incurred in due course to run a business. Even if we are to exclude severance cost, considering it one-time only, the operating profit would have still declined by $4.2 million, approximately 18.2%  y-on-y.

  1. Performance vs Analyst Estimate
  • The stock has, in the past, performed lower than the sell side analysts’ estimates

Earnings History

4 qtrs ago

3 qtrs ago

2 qtrs ago

1 qtr ago

Surprise % to the negative

Over 60%

Over 34%

Over 36%

Over 40%

A company, with limited diversification and extreme sensitivity and exposure to the macro turmoil occurring throughout the world, trades at a P/E of 60.3. How reasonable is this for a company with an average analysts' EPS growth rate per annum for the next five years of less than 16.00%. Add to this a beta of 1.4 and one must scratch one’s head and utter… Hmmmm!!!!

It can be argued that this company’s forward looking PR is under 20. Of course, then again, we can argue just about anything. Glancing at the table above, we see that a glaring miss in four out of the last four EPS estimates in the last four quarters – consecutive quarters, that is - by an average of more than 43% tells you that the sell side community estimates aren’t worth the steam that emanates from the warm cow dung that rises on a cool October morning. Unless this time is truly different (like it usually is, right????), not only should one expect misses in the near future, one should expect misses big time! Soothsaying, forecasting and future telling along with forward PE estimates are mostly meaningless.

In addition to all of that, fellow and larger market participants are retrenching. 

Related articles in the oon to be dismal retail space...

Is The New US Consumer Consumption Bubble Primed To Pop? Yes, There's A Bubble!!!

What's The Best Way To Profit From Groupon's IPO?

I Suggest Groupon Offer Coupons To It's IPO Investors, They're Going To Need Them

 

What Does Groupon and The Matrix Have in Common?

BoomBustBlog subscription document icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36)

Groupon_Valuation_Page_03Groupon_Valuation_Page_03

Another BoomBustBlog Susbcriber victory to notch on your respective belts. Kudos! I'll keep this post short and simple.

Courtesy of William BanzaiCourtesy of William BanzaiCourtesy of William Banzai

BoomBustBlog subscription document icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36)

Groupon_Valuation_Page_03Groupon_Valuation_Page_03

The Greatest Risk To Retail Commercial Real Estate Is? Sovereign Debt! Macro Headwinds! Popping Bubbles! Busted Banks! No, It's The Internet!

The Chickens Have Finally Come Home To Roost At Sears

searssears

In January of 2009 (nearly three years ago, which is ironic), I went bearish on Sears due to a variety of reasons, the least of which was less than competent management (hedge fund managers don't necessarily make good department store managers), macro conditions and fundamentals sloped towards hell. Although this was initially a very profitable trade, the rip roaring bear market rally of 2009 shredded the short profits - turning them into losses if uncovered, and simutaneously disguised the many issues that we brought up in our initiail short analysis. Well, you can run but you can't hide, and the truth will ultimately rear its head. On that note...

For those who didn't see the CNBC Streetsigns show yesterday, I have put together a brief (often not so) fundamental overview of the stocks that were available for drafting in during the airing, along with my comments and opinions. Yesterday I released the analysis of Apples Q2 earnings, and I'm sure it contained content that you didn't read anywhere else.

 cnbc_draft_pick_collagecnbc_draft_pick_collage

CNBC reports that Groupon [GRPN  5.815 -1.735  (-22.98%)] plunged more than 20 percent after the daily-deals site missed sales expectations and handed in a cautious earnings outlook, due to Europe's weak economy and currency fluctuations. Shares have alreadyplunged nearly 70 percent since the company's IPO last NovemberAt least eight brokerages slashed their price targets on the firm.

You know that you really don't have to follow eight brokerages to make money on Groupon. All you really had to do was subscribe to BoomBustBlog, reference For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

I have commented ad nauseum on the percieved need to do business with name brands, those who do God's work, and those who simply cannot trade - muppet masters and all - as I clearly articulated on the Max Keiser show last week.
 

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Published in BoomBustBlog

CNBC reports that Groupon [GRPN  5.815 -1.735  (-22.98%)] plunged more than 20 percent after the daily-deals site missed sales expectations and handed in a cautious earnings outlook, due to Europe's weak economy and currency fluctuations. Shares have already plunged nearly 70 percent since the company's IPO last November. At least eight brokerages slashed their price targets on the firm.

You know that you really don't have to follow eight brokerages to make money on Groupon. All you really had to do was subscribe to BoomBustBlog, reference For Those That Want To Take A Peek Inside the Professional BoomBustBlog Paywall, Here's All of My Groupon Research - MUPPETS!!!

I have commented ad nauseum on the percieved need to do business with name brands, those who do God's work, and those who simply cannot trade - muppet masters and all - as I clearly articulated on the Max Keiser show last week.
... and on previous shows. 

Now, all of you Goldman, Morgan Stanley, et. al. lovers, don't get your muppetware in a bunch, you know that I know that you know that It Is Now Common Knowledge That Goldman’s Investment Advice Sucks???, as excerpted:

It's official, the mainstream media has turned on those "doing God's work" and come to the side of BoomBustBlog.

............................

Okay, enough the Muppet Manipulating, Money Marauding, Doing Work in God's Name Brand Bank Bashing... Let's get down to the nitty gritty of the report that I said I will give away for free. I am offering the report, earnings advisory addendum and accompanying simplified model to show what we're made of. Of course paying subscribers, and even casual blog readers, cannot say that I didn't thoroughly warn you! Early shorts on this stock as per our research notes valuation matrices would have given pleasant Christmas presents and would have also stuffed one hell of an Easter basket as well!!!

In case you still don't get it, the sell side research departments of these banks did not offer BoomBustBlog research to their clients. Oh no, then how in the hell can they dump their stock??? They issued glowing reports from their own analytical cum soft sales staff.

On that note, let's reminisce.... In June of 2011 I release proprietary research to BoomBustBlog Subscribers. You can now download said report absolutely free, here icon Groupon Forensic Analysis & Valuation (923.04 kB 2011-06-16 10:34:36). After reading said report, prepare for some real comedy, as reported by Dailypolitical.com:

Groupon (NASDAQ: GRPN) was downgraded by equities research analysts at Stifel Nicolaus from a “hold” rating to a “sell” rating in a research note issued to investors on Monday.

Other equities research analysts have also recently issued reports about the stock. Analysts at Bank of America (NYSE: BAC) downgraded shares of Groupon from a “buy” rating to a “neutral” rating in a research note to investors on Monday. They now have a $20.00 price target on the stock, down previously from $30.00. Separately, analysts at Benchmark Co. cut their price target on shares of Groupon from $32.00 to $28.00 in a research note to investors on Monday. They now have a “buy” rating on the stock. Finally, analysts at Goldman Sachs (NYSE: GS) reiterated a “buy” rating on shares of Groupon in a research note to investors on Thursday, February 9th.

Groupon traded down 3.20% on Monday, hitting $14.54. Groupon has a 52-week low of $14.85 and a 52-week high of $31.14. The company’s market cap is $9.376 billion.

Whoa!!! Goldman Sachs reiterated their "buy" recommendation just in time for their damn Muppet Clients to lose ~40% by the close of the market today. Go ahead, stuff those damn Muppets, fellas!

Groupon_Crash_warnings

For the record, in June of 2011, a full ten months ago, I made clear to my subscribers the following (as excerpted from the now free download)...

We value Groupon at $6.6bn using DCF. The current valuation is based on 10 years of revenue projections which are overly optimistic in our view.  We have forecasted revenues of $4.0bn in 2011 and expect revenues to nearly double to $7.5bn in 2012 and reach $35bn by 2020. We have assumed cost of equity of 12% and terminal growth of 3% from 2021 onwards. We have kept gross profit at stable levels and assumed operational gearing to (∆ Operating Profit / ∆ Revenue) to improve considerably. Despite these optimistic projections we were still not able to justify a valuation close to $10bn let alone $20-25bn. We only see downside risks to valuation of $6.6bn and believe that Groupon’s rejection of Google offer of $6.0bn was a mistake in first place. Google’s valuation of $6.0bn most assuredly included a premium for synergies that Google could have achieved with Groupon which would be clearly absent in the standalone entity. We see the fair value of Groupon close to $3.0-4.0bn if we assume a more realistic picture. Given all kinds of questions surrounding Groupon’s business regarding the sustainability of revenue growth, costs control and even the business model itself (i.e., the relationship with merchants) and external competition, we remain deeply concerned even on the sustainability of a successful IPO for Groupon. 

For the record, at about $14 per share, Groupon is market-valued at about $9.1 billion dollars!!!! Here are some key highlights: Groupon restates revenue, EXACTLY as I warned just three months earlier.

  1. Monday, 26 September 2011 What's The Best Way To Profit From Groupon's IPO?
  2. file iconGroupon Revenue Restated 09/26/2011
Groupon starts trading on the Nasdaq via IPO...
  1. Sunday, 13 November 2011 I Hope You Groupon IPO Investors Got Coupons At The IPO!!! Yeah, That's Right I Was The First To Say It
Favorite hits from said documents...
Groupon_revenue_restated_Page_1_copy
Groupon_revenue_restated_Page_2_copy
Groupon_Valuation_redacted_Page_03_copy
Groupon_Valuation_redacted_Page_04_copy
Groupon_Valuation_redacted_Page_05_copy
There's a WHOLE LOT MORE, but this post is long enough as it is. Simply download the links above, and don't forget to reference the valuation section of original forensic report. There's an early Christmas present in there for the stingy muppets!
 

 

Published in BoomBustBlog

The Wall Street Journal recently ran the following: College Debt Hits Well-Off: Upper-Middle-Income Households See Biggest Jumps in Student Loan Burden. Having a college age child myself, I can certainly identify. From my perspective, there is absolutely no way in the world a cogent mind can deny that there is an education price bubble in the US. I most certainly find the "This couldn't be seen coming crowd" to be anathema - to wit, the MSM and even Wikipedia (whaaatttt????) have featured the problem:

What makes this topic so interesting is that it brings to mind the work that we've been doing in the consumer discretionary/durables sector shorts - reference "BS At The BLS Leads To Profitable Short Opportunities As Hopium Smokers Get High Off Of Depreciated Dime Bags Of Manipulated Euphoria!" for a strong supportive fundamental/macro argument and some sample short candidates. Long story, short - I believe the consumer and retail sector is due for a pretty significant correction. My team and I have gathered a material amount of evidence supporting said assumption, and the evidence keeps mounting. The Economonitor ran a most interesting piece that puts a different perspective on this, which I excerpt as follows (the emphasis is mine):

... We look at aggregate consumer credit (and not merely the revolving portion more commonly associated with retail activity) because we believe that term loan borrowing—where available (chiefly student loans and autos)—frees up cash for other consumption.  Another way of viewing this is that transportation and education are not truly elective purchases and not leveraging those purchases would otherwise reduce overall consumption.

What the numbers tell us today (as illustrated in the below graph) is that, as of January 2012, the growth rate in all forms of consumer credit on a 3 month average basis grew at a rate greater than at any time during the credit bubble.  Moreover, at $2.495 trillion, outstanding consumer credit stands a 97% of its peak of $2.576 trillion in August of 2008.  Deleveraging, my friends, this is not.

Yesterday the Consumer Financial Protection Board reported that student loans alone likely moved past the $1 trillion milepost at year end.  

Aren't the post recession eras supposed to be engines of growth? Is it different this time? Of course not, silly rabbits. Tricks are for kids. It's not different this time because we NEVER LEFT THE RECESSION OF 2008! The Fed's liquidity spigot combined with regulator's legalizing outright fraud simply hid the fact that we have been in a great recession ever since. I have discussed this in detail in the post "The Circle of Life -Purposely Disrupted By Multiple Central Banks Worldwide!!!"

Additional tidbits from that most excellent Economonitor article...

    • Are we once again entering a zone similar to the period immediately prior to the Great Recession in which consumer borrowing also grew rapidly, and more and more of the new borrowing was applied to debt service instead of new consumption? Watching retail sales trends over coming months should be instructive in this regard.
    • The crash in the housing market has left us with $873 billion in Home Equity Line of Credit balances (at Q4 2011) owed by consumers, most of which is no longer collateralized by home value. While borrowers may be making payments (many at vastly reduced rates of interest given the floating rate nature of those loans), I would put forward the argument that as a practical matterunsecured consumer debt in the U.S. is actually well over $3 trillion.
    • We are programmed by past cyclical phenomena to look at consumer credit expansion after a recession as being a positive – heralding the arrival of the “confidence fairy” who the more supply-focused in the macroeconomic establishment view as the critical element to a recovery.  There is no doubt that there is an element of this in the expansion illustrated below but, like so many things about the present secular crisis, that is surely not the driving force when a substantial portion of the increased indebtedness is applied to making ends meet, rather than triggered by optimism about the future.

So, what's next? Well,  my next post will illustrate my findings on a company closely tied to consumer credit. Then I will drill down farther into the consumer discretionary/durables sector for casual readers and paid subscribers (privileged content, of course) alike. New subscription research is available for download in the consumer discretionary sector - Preliminary analysis and short candidate (Consumer Discretionary).

For those that do not follow me, I have been pretty spot on in regards to bubble identification... See Who Is Reggie Middleton for my track record

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Published in BoomBustBlog

For those who didn't see the CNBC Streetsigns show yesterday, I have put together a brief (often not so) fundamental overview of the stocks that were available for drafting in during the airing, along with my comments and opinions. Yesterday I released the analysis of Apples Q2 earnings, and I'm sure it contained content that you didn't read anywhere else.

 cnbc_draft_pick_collage

Here’s the list of stocks:

  • Apple: Reviewed in depth and in detail yesterdayFor those who do not subscribe, I suggest you ask a friend who does to share with you the difference between last month's valuation note target price (page 10 of File Icon Apple Margin & Valuation Note) and the price of Apple today, the day after earnings (just the difference, mind you - no giving away the BoomBustBlog content for free). Then ask them bout the logical argument behind the concern with Apple and the extremely volatile price action of the last few weeks. Subscribers, please download File Icon Apple 2Q2012 results analysis.
  • Starbucks: 
    • The company is expected to benefit from
      • Continued momentum and dollar share gain in the K-Cup segment
      • Ramp up of multiple key revenue drivers
      • Moderation of coffee prices, benefiting future margins. Coffee price have fallen 37% since hitting a 10 year high on 3rd  May 2011
      • The Company is entering into strategic partnership in different location; is seeking expansion in emerging economies including China and India
      • The stock ($59.5) is close to 52- week high ($ 62.0)
      • Starbucks Sales in China Contribute to Earnings Rise: New York Times‎ - 11 hours ago Earnings increased 18 percent to $309.9 million, or 40 cents a share, in the second quarter, propelled by more traffic in its stores and big
      • Starbucks announced that it continues to target approximately 10% revenue growth, driven by mid-single-digit comparable store sales growth in fiscal 2012
  • Priceline.com:
    • S&P upgraded the company to ‘BBB’ from ‘BBB-‘
    • Priceline business model of offering discount travel rates on car rentals, hotels, and flights has helped it stay afloat despite a weak U.S. economy and a slowdown in Europe
    • Company fourth-quarter net profit was $226 million, or $4.41 per share, compared with $136 million, or $2.66 per share, a year ago
      1. Bookings gained more than 50 percent from a year ago.
      2. 80% of operating revenue came from outside US, the company still has room left to run in emerging markets like Asia and Latin America
    • High growth and steady margins are strong positives for the stock
    • The recent launch of its Booking.com Tonight application is getting a lot of attention from travelers who book hotel reservations or car rentals at the last minute
    • The company’s business model is less resilient to the current economic turmoil
    The stock is continuously performing despite negative economic conditions (YTD:  +55%, 6M: +43%)

I will continue snapshots and opinions of all of the other companies (excpt the oil company) in two separate posts. 

Relate Video 

Reggie Middleton on CNBC Stock Challenge... I'm at 5:28 discussing Google.

Additional commentary and footage...

Published in BoomBustBlog
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