Archive for February, 2006

Long on those who go Long on Shareholder Lawsuit Lawsuits

According to the 10b-5 Daily, according to the Economist, according an article in the Stanford Law Review, according to a study by James Cox, according to data collected from 118 securities class-action suits between 1995 and 2002, 72% of institutions never claim their full share of the lawsuit proceeds.

The always interesting 10b-5 Daily notes that the article notes that institutional investors may be “violating their fiduciary responsibilities when they do not try to get their money” from firms violating their fiduciary responsibilities and could be the subject of “class-action suits” over the improper handling of class-action suits.

Told two friends, and she told two friends and she....

Recommendation: Start going long on anything going long on shareholder suits that sue firms that fail to file shareholder suits.

We are also shorting shorters of Funds of Funds invested in Mutual Funds, the frequent victims of the victims of shareholder lawsuit lawsuits.

Spam at its Best: Serret Bu(y)

Dear ????????

I write kindly in response to the email you sent me yesterday, which was as followed (translated from Japanese by Google’s “Human Translator Trapped in a Box” Service):

From: ????????
Date: 22 Feb 2006 22:22:50 +0900
Subject: ??????????

Is association with the Serret Bu woman whom it selects how? It gets wet to getting wet and the ? woman who is sown anytime and being perfection free anywhere, it introduces. Abundant service just of the member such as neighboring searching * copying mail searching fully! Until agreement it goes, thoroughly it is distant the partner searching. The stewardess * nurse * model * SECRETARY * housewife and the like it is on the register in large quantities and the ? is. Thoroughly getting the partner of your ideal, please pass the hot night.

The ? where with just no charge register the reply reaches from the woman directly in your mail BOX

Yes, please send me further information about joining your yacht club; I look forward to wet to getting wet with all the other boating members, especially the ? woman.

Recommendation: Long “? ” and potentially “Serret Bu,” if you can find any paper. Continued Sector Outperform rating for scones.

Quotes Entirely Relevant to Investing (and Making Money)

No one can earn a million dollars honestly.

-William Jennings Bryan

Sellout Saturday: Adding Google Site Search Module to Your Site

This is a secret sell-out. I struggled forever to get a small form factor site search module from either Yahoo or Google. At first, I opted for Yahoo as it seemed to be the more flexible code and hoped it would boost our Yahoo search ranking which seemed to blow. I settled on Google once I stripped out a bunch of different aspects of it and got into the smallest size possible. So if you want to add Google Site Search to your Site and in the slimmest fashion, use the code below. Be mindful that you need to replace the three bracketed portions (“”) with your own url in the format as it is in the brackets. But remove the brackets. Works great in a sidebar, as you can see at the bottom of ours.

Here is the code: Link to Google Search Module Code

Here is a picture of an orangutan:

By using this code, you are essentially leveraging yourself to my coding skills. Which plays into my self-involvement meme.

Short Expectations

The following was contributed last week by our new writer, Equity Private, who has an excellent blog about being an private equity insider. Both He/She/It (“Hsit”), along with Female to Be Named Later (links to her blog), will be contributing at will.

Meta data surrounding “investor relations” has the potential to become a derivative vehicle itself. Investor Relations (“IR”) is a field which has developed into an art and a science due to the importance of earnings announcements and the triumph of the short-term (12 week) focused analyst over the long-term (12.5 week) focused analyst. Below, we outline a system to guide equity strategies in this realm.

Expectation Expectations (Expectation Derivatives)

Relations strategies employed by firms can best be understood on the two axis defined by the continuum between “passive” and “active” on one axis and “earnest” and “obscene f***king fabrication” (“OFF”) on the other.

  • Firms with little communications program are on the “passive” side of the continuum. The likelihood that a given firm will fall to the passive side of the continuum is inversely proportional to the square of the total theoretical mass of the egos of the senior management. (The number for our analysis is 2 and consists of GOOG and the NYSE-listed firm whose IR department spent their entire annual budget at strip clubs prior to the collection of data).
  • Firms with frequent, detailed, descriptive and lengthily communications are on the “active” side of the continuum.

  • Firms with honest, direct and accurate communications are classified on the “earnest” side of the continuum. The number of firms on this side of the continuum is also quite small. (Note: If the definition of “honest, direct and accurate” is refined to omit profanity directed at analysts on investor calls this number drops to zero).

  • Firms with inaccurate, misleading (intentionally or otherwise), obscure, evasive, or immaterial communications are classified on the “obscene f***ing fabrication” side of the continuum. 950 examples of these firms exist among the Fortune 500. (Note: This figure includes 450 off balance sheet “special purpose entities”).

  • Firms with highly active disclosure profiles and highly OFF-leaning disclosure profiles quickly burn reputation capital among analysts and observers. The short term gains initially realized by such firms are quickly lost following discovery of the firm’s true location near the far frontier of OFF. Firms in the first OFF quartile show net losses of -56% compared to other market actors. These losses, however, typically follow a huge wave of gains.

  • Firms with active and “moderately” OFF disclosure profiles perform poorly as well. Throughout their history their only moderate OFF position communicates results below those of the high OFF actors. Since they appear to perform poorly relative to the high OFF participants they are discounted by investors.

  • Firms with passive leaning disclosure profiles also perform poorly. Those with OFF leanings suffer versus active OFF leaners as they are perceived to release “too little good news,” according to one CSFB official who commented on condition of anonymity from federal prison. Those with earnest leanings are characterized as “boring, with too little good news.”

Efficient Frontier Dangers

Even firms along the efficient frontier of OFF/Active boundaries face perils. Dell(DELL) is classified as an active OFFer. Dell’s carefully crafted investor relations program has had the effect of depressing earnings expectations consistently for years. Unfortunately for Dell, analysts have grown sophisticated; they publish one set of expectations while harboring another set of “double secret expectations” amongst themselves. These “double secret expectations” are generally arrived at among analysts at a quarterly secret meeting in the “champagne room” of Scores.

Dell’s failure to exceed the second tier of secret expectations is punished. In response, Dell began to offer even more depressed earnings guidance based on second derivative expectations (their expectations of the analysts expectations). There are rumors that Sell Side analysts are now developing in the lab a third derivative expectations but shortages of key ingredients such as molybdenum and bullshit have hampered their efforts.


For investors with longer horizons:
Short firms with investor relations programs

For investors with shorter horizons:
Go Long on newly listed firms with budding investor relations programs and sell immediately after the third quarter of disclosures.

But we expect that you expect that we already expected that you expect this.

If Russians can’t do it, it can’t be done

In the continuing spat over the investability of Russian equities, I offer the following picture which once again shows that Russian aircraft manufacturers (in this case Ilyushin) and Russian airlines (in this case Vaso Air) have everything under control.


Taken on January 10th, the mere inches of runway left before this plane gets airborne clearly depict two things: 1) Russians are strict stewards of capital only building as much runway as absolutely necessary and 2) Once in place, Russians focus on high asset utilization, using as much of the runway as possible to generate outsized returns.

Recommendation: Long the Russian aviation sector. We believe Russian airlines are likely to use 30% more runway than other carriers, 20% more runway than is legally allowed, and only 1% less runway than is possible. This will lead to profits.

With thanks to enplaned for the pic

Updated Anti-Web 2.0 Wiki

I’ve added some of the comments listed for the Anti-Web 2.0 wiki and also an image. We’ll continue to update it as comments and trackback roll in. Check this anti-Web 2.0 Wiki out and add your own definitions, especially if they are in French or foreign languages and we can’t understand them.

Interesting Resumes #1: Shepherd Equity

Given Long or Short Capital’s international status, we receive a large number of unsolicited resumes. Most of these are of the standard I-work-at-an-ibank-and-hate-my-life-please-hire-me-so-I-don’t-kill-myself variety. However, we are sometimes contacted by extraordinary talent from obscure walks of life. I feel obliged to share some of these fascinating backgrounds. Most recently, we were approached by a former shepherd, interested in making a career change. He accomplished a lot as you can see from a few quotes taken from his CV.

  • Personally tended to 300 sheep, including over 35 lambs.
  • Shucked over 3,000 bushels of wool and sold 95% of bushels at market.
  • Recruited and trained three sheep canines allowing my supervisor to double the number of sheep I was responsible for
  • Increased wool yield per sheep threefold by augmenting roughage
    portions in standard sheep diet.
  • Created new, multi-colored wool through inventive use of industrial dyes.
  • Located and recovered 13 lost lambs without injury or death.
  • Tended flock for four years without a single case of mad lamb disease and only one sexual harassment allegation (which was later dropped when the accuser was made into stew. Sheep stew.).
  • Doubled revenue per lamb sold at market by implementing an innovative, double-blind dutch auction bidding process.
  • Designed propietary DCF models of middle market farms ($15-60mm EBITDA) which drove external acquisition strategies.
  • Outlined structure for successful comedic undertaking involving lamb milk, your sister and babaganoush.
  • Hobbies include: Mountain climbing, world travel, milking, drinking milk and being milked

Later this month you will get to sample from additional elite applicants to Long or Short Capital, the oldest online financial humor analysis shop.

Satan’s Portfolio: RCII, Gazprom, and Verizon

Future additions will be in threes, as all bad things come in threes. Here is an explanation of Johnny’s Satan’s Portfolio Investing Thesis.

Rent-A-Center (ticker: RCII)

Rent-A-Center targets the least educated and poorest American demographics and sells them rapidly depreciating consumer goods via installment. Legally, they classify these layaway sales as “renting” to ease their regulatory burden and to ensure they can charge implied interest rates of mulitple hundred percent without being regulated or stopped. The tax treatment of depreciation also eases their tax burden. Screwing the government and the poor. Rent-A-Center is the BEST. True that. Double true!

Gazprom (ticker: OGZPF.PK)

As the saying goes “The Ukraine is Weak!” And that’s not all who is weak. Take a look at where Europe gets an irreplaceable amount of their oil. Russia may or may not be a place to fear, but 1) Satan has no fear and 2) his rule of thumb is that if he puts his money with Russian mafiosa and elected officials who are more evil than he is, than his money is likely to triple as peaking oil and regional scarcity give Gazprom real ultimate power.

Verizon (ticker: VZ)

This one is entirely personal. Verizon has screwed multiple members of this staff with such calling plans as “Nationwide Horrible Customer Service” and “The Dishonest Business Practice In Network” and my personal favorite the “Friends, Family and Fraudulent Charges Plan”. Verizon doesn’t screw customers to make a buck, or because it has to; Verizon screws customers because it wants to. What this means is that Verizon has a high EP ratio (Evil:Profit) which gives them substantial leverage as they ramp up profits. A clear buy signal.

Quotes Entirely Relevant to Investing

Advice is judged by results, not by intentions.


Sell Out Saturday: Announcing Our Intention to IPO

On More details to follow but we will be marketing our IPO in due time. Prepare to have enough capital to be able to own a fictitious piece of us.

Short The Guy Next to the Guy

Months ago I got free business cards for with the intention of some guerilla marketing. Never happened. So yesterday, I got around to doing something about it and and gave the guy who stands next to the guy who gives out free daily newspapers the stack of 200 business cards and offered to pay him $20 to hand them out to “every dude you see in a tie.” I made sure he was properly incentivized by letting him know that if this went well, I would be doing this every day next week.

Suffice to say the results weren’t great. The upward bound of the traffic it generated was 13 visits for 200 cards and $20. But it probably generated much fewer than that and I get the feeling that not a lot of people were even given the cards. It was the first time I felt like what it must be to be Vonage. Skyrocketing CPA!

Recommendation: Never outsource your customer acquisition efforts to the pseudo homeless. Also, always go short “the guy next to the guy”, and only expose your portfolio to an actual “the guy” position.

Longue ou court…en francais

Mes amis! Regardez cette page ici régulièrement si vous voulez lire des articles financiels en francais mauvais. Cette page = “super cool”.

Short Girl-on-Girl

The market for hot (or cold) girl-on-girl action is cyclical; when generationally girls are prudish and treat girl-on-girl as verboten, the corresponding value of a girl-on-girl act is astronomical (certain theorists would argue it is incalcuable). Reacting to these high prices causes producers to bring on uneconomical girl-on-girl mines. These are mines where previously the cost of bringing the girl-on-girl out of the Earth guaranteed negative margins, but now can actually generate a stream of free cash flow. As supply increases, girl-on-girl prices begin to go down. Like most commodity markets, new supply which is brought on from marginal girl-on-girl mines eventually outstrips demand and the girl-on-girl cycle starts again.

Girl on Girl

Ramit Sethi offers this perspective:

[Things I Hate]. Girls who overestimate how hot it is to see them making out with another girl. I cannot count the number of times some girls want something and say something like “Are you surrrrre you don’t want to hang out? Who knows what will happen?” (wink, hugs her female friend). Ok. First of all, stop teasing because I have known you since 2nd grade and nothing is going to happen. Second, KISSING ANOTHER GIRL IS NOT AS HOT AS IT USED TO BE. Thank god the Internet has disintermediated your power. Actually, it’s kind of sad to see the vestiges of something that may have worked 4 years ago (you offering to maybe kissanother girl) still struggling to exert influence.

Recommendation: Short girl-on-girl action; Hold FFM Threesomes. Currently we are in a period of low girl-on-girl prices as trendiness has brought the price down from $Awesome! down to $Still Pretty Cool. We think there is still substantial downside and our current target is $Pleasing. There is an outside chance of a steep correction if there is a backlash of rampant conservatism in the youths of tomorrow, but visibility is pretty good right now, and we see that as an unlikely scenario.

Next Page »