Long or Short Capital

Sexual Harassment Arbitrage allows attractive women to gain direct and indirect compensation from their Attractive assets, as follows:

Attractive people have a unique arbitrage opportunity. All thing being equal, they are more likely to be hired for a given position than a less attractive peer. But all things remaining equal, they are also more likely to be sexually harassed by their superiors than a less attractive comparable employee. This gives attractive people the opportunity to “double dip,” so to speak. They can gain employment and the ensuing compensation by virtue of their looks; then they can compound their returns by getting sexually harassed and filing multi-million dollar suits[.]

While we stand by this analysis, it comes with a caveat that, like most things requiring logic or fairness or human rights, it does not apply in Russia. There have been only 2 successful sexual harassment cases in Russia since it was the Soviet Union, and a recent suit was dismissed thusly by the ruling judge:

The judge said he threw out the case not through lack of evidence but because the employer had acted gallantly rather than criminally.

“If we had no sexual harassment we would have no children,” the judge ruled.

And then some amazing facts which support my contention that Russia is a place to fear:

According to a recent survey, 100 per cent of female professionals said they had been subjected to sexual harassment by their bosses, 32 per cent said they had had intercourse with them at least once and another seven per cent claimed to have been raped.

Eighty per cent of those who participated in the survey said they did not believe it possible to win promotion without engaging in sexual relations with their male superiors.

Women also report that it is common to be browbeaten into sex during job interviews, while female students regularly complain that university professors trade high marks for sexual favours.

Recommendation: Russian firms can arbitrage sexual harassment arbitrage by hiring exclusively “office hottie” caliber employees. They get full benefit for the 20% bump in productivity without being subject to the increase in sexual harassment related legal costs. The play for women and non-whites and people with ethics is to remain away from Russia.

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Dred Scotch: It Seemed Like a Good Idea at the Time.

Recommendation: A classic case of Maybe Not Marketing. With its dark humor, it plays on the learned sophistication of the Scotch drinking demographic with a call to a pivotal moment in American history. But sometimes humor can be too dark.

HT to Kit

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Give a man a fish; he’ll eat for a day. Give him a sub-prime fish loan and you’re in business, buddy!
-Stephen Colbert

Past Quotes Entirely Relevant to Investing

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Long or Short turned three earlier this week. Three is an interesting age, when you are just getting confident on your feet, forming words and sentences with rapidly increasing complexity, and, if in China and female, celebrating the third year anniversary of your drowning death. As we become literate and eventually attend pre-school, I hope you will bear with us, all the way through the awkward future tween years that lurk ahead. Then you can pretend you aren’t our parents and leave us at a Bangladeshi train stop to be sold into slavery or consumed by anthropomorphic global warming induced rising sea levels.

Regardingly,
The LoS Staff

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September 2nd 2008, according to Young Jeezy according to Pitchfork.

This Is Why It’s Hot: Hip-Hop analytics is a powerful , if nascent, tool. Formerly, the medium was known as solely a form of entertainment. The trend has been for leading hip-hop performers to make a transition from “artists” to “businessmen”. 50 Cent has ventured into private equity with his stake in Vitamin Water, while Jay-Z has been involved with a leveraged buyout transaction of his clothing line, Rocawear, amongst other ventures. We think it is inevitable that Hip-Hop itself will also make a transition, from “art” to “analytical tool”. We will stay abreast of all related developments and I will not stick my manhoods in the mashed potatoes*.

*Unless it will result in better performance for our clients or it really is that kind of party, than I will stick my manhood in the mashed potatoes.

HT to Pasha

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But the glass is 35% full, as that is how many passed Level I of the CFA’s Guarantee of Future Investment Performance Exam. Now I know that 65% of you are dejected and feel beaten down by life, by the capricious nature of your cruel Chartered master and by the implied future whips of the 35% of your cohort who did pass Level I and will likely be your bosses very soon. But do not look so glum! You managed to crash the CFA site server and ensure that many people who passed will have their glory delayed. If you can’t win, make life worse for those who did! Also, drink heavily.

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In this troubling article, Struggling in Ohio as the Economy Tightens, the tightening of the America economy is played against a background of the tightening of the belt of many poor Americans (not us, we are very rich). This picture and caption were included.

Angelica Hernandez (left) and her mother, Gloria Nunez, struggle to make ends meet on a very limited budget.

Althought not discussed in the article above, formerly the bare minimum daily diet of an America in the USA was some combination of this (or regional or seasonal substitutes):

• 30 shrimp
• 1 extra-large meat lover’s pizza
• 25 cool ranch fun-size Dorito packages
• 1 Mountain Dew Slurpee
• 1 Cherry Slurpee
• Porterhouse for Two from Ruth’s Chris
• 75 eggs
• 1 lettuce plant
• 1 lb of candy corn
• Cheetos (a quantity sufficient to stain your tongue and fingers orange permanently)
• 3lbs of lobster
• 1 diet coke

This allowed America to be healthy, productive and as happy as the Danes. But not anymore. With the recent surge in food prices, many poor Americans are being forced to the face the nightmare of only being able to survive on a diet consisting of such things as

• Rocks
• Polonium
• The Stuff from the movie The Stuff
• Toxic Chemicals
• Other poor Americans

Recommendation: Of these the last is looking to be the most delicious. Two birds can be killed with one stone were poor Americans to eat one another and if you do the math between the cost of food and the quantity of calories needed to sustain poor Americans, it seems inevitable. This shift in consumption would have a deflationary effect on food prices, effectively eliminating the marginal pressure that poor Americans place on demand, because these poor Americans will already have eaten or been eaten (as it should be in nature). In our analysis, this would lead to a simultaneous gap up in the prices people pay for poor Americans, especially when the market fully factors in how fatty, tender and delicious this meat is.

The play here is to start buying distressed poor American assets and forming farms, ranches or even islands dedicating to housing them and fattening them on low cost / calorie inputs like McDonald’s (NYSE: MCD) dollar menu and corn syrup IVs. Long poor Americans.

HT to Amanda

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I, Ryunosuke Tsukue, trust only my sword in this world.
-Ryunosuke Tsukue in Sword of Doom

Past Quotes Entirely Relevant to Investing

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Zimbabwe is introducing a Z$100bn bill to circulation. This does not cover one days worth of expenses (Z$500bn) for a person living in Zimbabwe (an unlucky sperm club member). Normally, this would be a terrible thing. However, rampant inflation is a fact of life in Zimbabwe and taken for granted. What the citizens don’t realize is the great lengths their government is going to in order to encourage math skills. For instance, calculating the cost of lunch (Z$100bn) for a week (multiply by 7) including inflation (estimated at 4,500% to 11,000%) requires seriously carrying some digits; the cost for a week is well into the trillions!

Recommendation: Invest in human capital: smuggle waiters, cashiers, and other frequent handlers of cash out of Zimbabwe. These people will be able to mentally manipulate numbers of 13 or 14 digits quickly and accurately. Long or Short estimates that at current inflationary rates, these humans will be able to replace most semiconductors’ calculation power by the end of 2008.

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Mankind is divided into rich and poor, into property owners and exploited and to abstract oneself from this fundamental division and from the antagonism between poor and rich means abstracting oneself from fundamental facts.
-Joseph Stalin

Past Quotes Entirely Relevant to Investing

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Submitted by reader Matthias

Given the “consolidation” in the banking space that has started with IndyMac, the person that looks to become the heir of the U.S. retail banking industry, is FDIC Chairman and future Chief Holder of the Bag (CHB (disambiguation, this is not a reference to Dan Shaughnessy)), Sheila Bair. But who is Sheila Bair?

Per the FDIC web site, her background is in authoring children’s books, which undoubtedly will come in handy, as she explains to the depositing public the finer points of what exactly is NOT covered by FDIC insurance. The trouble is, the original story of “Rock, Brock and the Savings Shock” is just leading the Nation’s children down an ill-conceived path to risky savings, rather than opening their eyes to the prudent possibilities of borrowing.

From the book description on Amazon:

Rock and Brock may be twins, but they are as different as two twins can be. One day, their grandpa offers them a plan-for ten straight weeks on Saturday he will give them each one dollar for doing their chores. But there is a catch! Each dollar they save, he will match.

Rock is excited-there are all sorts of things he can buy for one dollar. So each week he spends his money on something different-a toy moose head, green hair goo, white peppermint wax fangs. But while Rock is spending his money, Brock is saving his. And each week when Rock gets just one dollar, Brock’s savings get matched. By summer’s end, Brock has five hundred and twelve dollars, while Rock has none. When Rock sees what his brother has saved, he realizes he has made a mistake. But Brock shows him that it is never too late to start saving.

Contrast this with the more recent thinking coming from CHB Bair:

The FDIC’s seizure of IndyMac has given Ms. Bair the ability to put her strong views into action. She has complained that lenders weren’t moving fast enough to help borrowers with troubled loans move into more affordable mortgages and avoid foreclosure.

Last October, she shocked mortgage servicers, investors and many in Washington when she pushed lenders to freeze introductory interest rates on certain high-cost loans to protect borrowers from unaffordable mortgage payments. As foreclosures snowballed, her plan attracted more attention. In December an industry coalition agreed to freeze interest rates for five years for certain borrowers who qualified.

Ms. Bair was pleased, but kept pushing. She argued for more, bigger government action. This spring, she proposed a $50 billion government-loan program that qualified borrowers could use to pay down a portion of their mortgages.

Recommendation: I think it is time to tell the real story of Rock and Brock. The one, where Brock puts his money into an FDIC insured savings account, while Rock asks his friend Kerimov to hook him up with some later-untraceable source of leverage, investing the proceeds in Russian oil assets. At the end of 10 weeks, Brock’s savings bank is kaput, wiping out most of his savings. Over the same period, Rock’s oil assets have doubled, which leaves him with enough cash to purchase the operating assets of Rock’s S&L, after negotiating a free put from the Fed. And a Ferrari Enzo.

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Topher Cox, head of the SEC and also a Jedi knight, has issued an order aimed at crushing the short-sellers and SITH lords who are trying to destroy the GSEs and some of the major investment banks. That order is the requirement that a trader must pre-borrow shares before shorting certain stocks.

SEC Chairman Christopher Cox said the SEC would institute an emergency order requiring any traders to pre-borrow stock before shorting Fannie Mae and Freddie Mac, the embattled government-sponsored entities that own more than half the nation’s mortgages. It would also apply to the stocks of Lehman Brothers, Goldman Sachs, Merrill Lynch and Morgan Stanley. The order is a near-term fix and will expire in 30 days.

…

Wall Street has been calling for the SEC to address short-selling, which some believe is contributing to market volatility and could be used to manipulate shares of financial stocks.

…

Under current rules, a short-seller must locate shares to borrow, which are later replaced with stock bought at a lower price. Some market watchers have been concerned that traders were borrowing the same shares from the same lender over and over, and driving down stock prices.

Recommendation: We’re sure that this regulation is very important and will fix all the underlying problems. The root of everything isn’t awful management, poorly calculated risk assumptions, no-no, just like with Overstock (NASDAQ: OSTK), the real problem is that the stock price is low and that’s due to market manipulation and that large Death Star that the market manipulators have been using to target certain financial stocks. Christopher Cox, you are the winner of the esteemed Patrick Byrne Award for Fighting Market Manipulation.

Be sure to pre-borrow Christopher Cox shares before you short him.

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In my family, it has been a masculine tradition to keep logs of economic thought and financial analysis since the days of Ancient Rome. I will from time to time share with you relevant passages from these Legacy records.

From my forefather, Tupac Huayna Madacagalu (relayed through our familial oral tradition):

Dealing with Inheritance

Death is a very tax inefficient occurrence. You die then your estate gets devoured by Quirsatec, The Great God of the Levy. This has been THE great financial planning quandary of my time as Emperor of the Inca Empire. And I think I solved it.

Bundled up on a crisp June night, a pan flute filling the air with its melodies, I drank chicha and pondered tax efficient solutions to the death problem — what can we do to best minimize estate taxes? And it hit me, like a great bolt from Apocatequil:

I will never die and thus never bequeath my estate and also never pay the taxman any goods.

This will likely require some alterations to our belief system, but as ruler, that is all in the game.

As I thought later, I realized the genius of my own genius. Not only would I minimize taxes and not die, but I would ensure that my offspring were properly incentivized to go out and conquer for themselves, for otherwise they would have nothing and they would likely be thrown off the cliffs into the depths below with nary a single coca chew to soften the blow when the state falls apart around them! Oral Note to self: This is also a great opportunity to create a post-mortem fashion and maintenance start-up and produce crazy profits.

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