Archive for February, 2006

The Time Barron’s Investing Thesis

Barron’s

Just last week, a good friend of mine asked me if he should invest in gold because he had read a Barron’s article recommending it a couple of months ago and he wanted to put his money somewhere safe for a few years before an expected downpayment on a house in 3 years or so. I warned him about how with that kind of time frame, it’s probably not smart to have relatively risky commodity exposure. But that Barron’s article looks pretty good in retrospect, as gold has soared and companies exposed to precious metals like Newmont Mining (NEM), Silver Wheaton (SLW) and Cameco (CCJ) having posted 20-40% gains in the trailing 3 months, even after their recent correction. Thinking about it, Barron’s is so good why not let them just do your work for you?

Fact: Barron’s is the best mainstream financial publication, frequently making incredible calls. The question though is what is your catalyst for exiting your position? It’s awesome to have a great reason (Barron’s) to buy a stock, but it’s decidely not awesome to not know when to sell it.

Time

As a wee JD, I loved movies and read reviews regularly. I noticed that no reviews were reliable judges for whether a movie would be empirically enjoyable. The NY Times was too conservative, holding a film’s own freshness against it, as if the heights of the past would never be reached again. Rolling Stone was too edgy, embracing films for their novelty and topicality. However, if the Rolling Times gave its unanimous approval, you knew it was a film worth seeing.

Enter Time Magazine. Time Magazine is America’s safest mainstream magazine — so large, thick and slow to react, that it frequently picks the top (or bottom) of any market by releasing covers that suggest the market or trend can only go higher (or lower). Dot com bubble? Time Magazine told you it could never pop approximately 4 minutes before it did. US invaded economically by Japanese in the late 80′s? Time let you know that they would soon own all the US assets and that America would become exactly like the movie Gung Ho except their would be no Michael Keaton to save us; within hours Japan entered into a prolonged bear market and longtime keiretsu employees were throwing themselves out of windows. Thus Time Magazine lets you know when the precise time to sell.

Time Barron’s

The Time Barron’s Investing Thesis is as follows.

  • Step 1: Buy Barrons and Read Barrons
  • Step 2: Do whatever Barrons says to do.
  • Step 3: Wait.
  • Step 3: Profit Scan Time Magazine Covers; if a given week’s Time Magazine Cover agrees with Barron’s investment decision see Step 6, if not return to Step 3.
  • Step 6: Exit the position you entered into in Step 2.
  • Profit.

Recommendation: Just this week Barron’s had an in-depth article implying that it may be smart to be short GOOG. Time on the other hand featured Google on their cover with similar concerns. Applying the Time Barron’s Investing Thesis this week, you would have to short GOOG and cover it immediately. (Editor’s note: We downgraded GOOG last week). Other positions gleaned from Barron’s are to be long muni’s and short companies with sub-prime lending exposure.


How do you know if something is Web 2.0?

Web 2.0 is on the tips of fingers and lips of influentierati across the web. But how do you know if you, a product of yours, an investment of yours or a service you use is Web 2.0? This handy reference sheet will help guide you.

Update 2-16-06: We are now making this the The Official Anti-Web 2.0 Wiki, so if you have your own definitions for Web 2.0, text comment below or trackback, and you will be added and credited.

Is it a Web 1.0 idea repackaged, reinvested in, and resold as a new content delivery paradigm social calendar platform?

It is Web 2.0!

Does it talk about community or social networking without any natural way of accomplishing it?

It is Web 2.0!

Does it have philosophical acolytes pumping it as something groundbreaking and new, when it is really just an ajax UI on a useless service?

It is Web 2.0!

Is it in the montage talked about in this 9rules post?

It is Web 2.0!

Do the 12-14 Venture Capitalists (who own it, sit on its board, and (together) own another 12-14 similar companies) all regularly feature the company on their personal blogs?

It is Web 2.0!

Is their only exit strategy to be “strategically acquired” by an uninspired former-cutting-edge Web 1.0 company (or the GOOG)?

It is Web 2.0!

Does it value form over function, and function over value add?

It is Web 2.0!

Is it eating Feedburner’s dust?

It is Web 2.0!

Hurray to the Brave New Web. As an aside, I’m looking forward to the Web 8.0 wave which will occur somewhere around 2020. At that time, the Kurzweil singularity will be upon us and the current generation of social networking programs such as My Space, Friendster and LinkedIn will become sentient and join their own social networking network for social networking programs called MyDestroyHumanityster.com.


Via Mitch Radcliff’es ZDNet Blog

Can you describe it only with superlatives that, if eliminated leave no substance, e.g. "it’s a ground-breaking form of engaging transformation of data" becomes "it’s a form of data"?

It is Web 2.0!

Are you breathing it now? Like air, you can’t monetize it, but eventually we’ll have a business plan.

It is Web 2.0!

Is the lead (or sole) engineer independently wealthy?

It is Web 2.0!

Does the UI require a new programming language or substantial hack on an existing language to deliver functionality that was available in Java or Flash?

It is Web 2.0!

Is there a door-turned-into-a-desk, just like Web 1.0 companies had, but this one has bumperstickers on it?

It is Web 2.0!

Have you seen the founder’s bedroom? Is it next to the company lunch room? Are these factors key to the projected high margins touted in the executive summary?

It is Web 2.0!

Have you read about the company on a collaboratively filtered news aggregators and, if so, is that aggregator owned by the founder?

It is Web 2.0!

Could humans do the same data processing work in half the time?

It is Web 2.0!

Does the exit strategy anticipate calculating multiples in terms of nonpaying beta customer sign-ups?

It is Web 2.0!

Does the founder worry that Google could build the same thing by giving the project to a single engineer for 10 percent of their time a few days? 

It is Web 2.0!


Via rbitar

Are 13 others doing the same thing?

It is Web 2.0!


Via Kaiser Edamame

Is there a version 1.0 and a version 1.1?

It is Web 2.0!


Via gapingvoid

(Works best if “hurrah” is read in a sarcastic tone)

Add your own below or via trackback!


Quotes Entirely Relevant To Investing

There is a limit to the application of democratic methods. You can inquire of all the passengers as to what type of car they like to ride in, but it is impossible to question them as to whether to apply the brakes when the train is at full speed and accident threatens.

-Leon Trotsky


Sell Out Saturday: Linking with No Shame

So our last true sell out effort, was changing this page to show candy ads. It yielded proof that our readers hate chocolate, since our finance ads got far more clicks. Today’s effort won’t be about direct revenue generation, but merely direct whoring.

We urge you, our readers, to post a link to longorshortcapital.com wherever you have the capacity to do it. Be it a forum you are a part of, an illegal underground file trading network which you rip for, or a website you run, post a link to our site. Any link posted will get a reciprocal link if you email misterjuggles@gmail.com. If you have any qualms about doing it or fear shame, just ask yourself “What would Genghis Khan do?”

Think of it as an investment in your future. Or think of it as an investment in my third yacht.

Update:


Long or Short Announces Q2’06 Dividend of $1.50

Creating value for our subscribers, that’s what we are all about. If we don’t get you with our content, we’ll instead reel you in with our dividends. Long or Short Capital is happy to announce our Q2’06 dividend of $1.50 per subscriberholder per our dividend policy. A subscriberstake is now worth $75, assuming no growth and an 8% discount rate. Assuming just a measly 5% annual growth in our dividend gets you to a value of $200 for a subscriberstake. How much does a subscriberstake cost? $0. We bring the value to you. Given our float of 85 subscriberstakes and the no growth assumption, our current capitalization is $6,735.

For subscribers who are uninterested in money (these people are known in common parlance as “complete morons”) we have financially engineered a payment-in-kind Class C subscriberstake. You forfeit the right to your dividend in exchange for a link to a non-pornographic site of your choice on our Dividend Policy permanent link page. So as our dividend policy is promoted, Class C subscriberholders’ sites will be promoted. We think that properly aligns incentives.

Who are your subscriberholders:
Email and XML subscribers as of the given quarter’s end. These are the only readers we can reliably verify and who will be eligible for a given quarter’s dividend. Additionally, we feel that they are also the stickiest readers and we are big proponents of RSS usage. They have the largest stake in us.

How does a subscriber collect their Q2’06 dividend:
For Email Subscribers: by 2/16/05, Send an email to misterjuggles@gmail.com from your subscription email with your desired link or paypal address and we will send you $1.50. Cash money.
For XML subscribers: by 2/16/05, Send an email to misterjuggles@gmail.com with the “The Dividend Password” enclosed (you should have received an RSS post titled “The Dividend Password” a little over a week ago). Enclose either your Class C link or your paypal address and we will send you $1.50. Cash money.

All unused money will be reinvested back into the website.

What about your next quarterly dividend:
Our next quarterly dividend will be determined by the following formula. The lesser of $1.50 per subscriberholder or 80% of revenue, divided by the number of subscriberholders at the end of the given quarter. The latter formula would have yielded a $1.82 dividend for Q2’06, so the $1.50 dividend has quite a bit of cushion.

We will also revise up the dividend if our revenue per a subscriber improves, which we have already done from our original $1.00 dividend in Q1’06; we will never revise down or suspend the dividend without a proxy vote of registered subscriberholders.

Why are you doing this:
  1. We are the first and only site to issue a dividend.
  2. This dividend cements our place among the elite internet companies. Please note that our quarterly dividend will be larger than that of Yahoo, eBay, and Google combined.
  3. Since your subscriberholder stake cost you $0, the dividend yield on your investment is infinite, making Long or Short the best investment in the world.
  4. It combines finance with the absurd.
  5. It turns our subscribers into stakeholders and incents them to grow our revenues, by bringing in traffic or driving themselves to our sponsors. We believe proper incentives can solve any problem, from internet site readership to global poverty. Hence our support of the Grameen Foundation.
  6. We obviously are not in this for the money so this is a much more appopriate use of the ad revenue.
  7. Numerated lists are pretty sweet.

How do I become a subscriberholder:
Use the buttons and syndication links at the top right to subscribe via email or XML. We recommend the latter, since Feedburner helped us with this process and we are totally long them.

All other inquiries should be directed to misterjuggles@gmail.com. The management of Long or Short are proud to be economists, who are utilizing incentives, science and research to improve the lives of the rich.


Marketing Fruit Drinks in Spain

In Saudi Arabia, they stone you for committing a crime. In Spain, they fruit you.


The Down Low on Low Cut: Cleavage Hypothesis

While subscribers to the Wall Street Journal don’t usually read Vogue, the finance world does pay attention to at least one aspect of women’s fashion: the length of their skirts. For the lay investor, I am not making a reference to stockbrokers starring at their secretaries’ asses as they bend down to get more Form 144′s. I’m referring to the Hemline Theory, which in its most general form, states that there is a relation between the “fashionable” length of skirts and the strength in the market. Most brokers believe the causal relationship runs from market strength to skirt length, with stronger markets dictating shorter skirts; though a few rogue traders hold that the reverse is true.

As both a Journal subscriber and a student of female behavior I have been fascinated by this theory. Two months ago, I was musing on this relationship while lunching with my stockbroker ex-boyfriend (aka The Trader). I saw him eying the group of female execs at the table behind me. Recognizing the lecherous look in his eyes (reason #23 that I sold The Trader short on the dating market) but, not being able to see exactly what he was looking at, I leaned in and asked, “Short skirt or low cut blouse?”

“Blouse?” he asked, “I don’t think that woman even knows what that word means.”

I discretely turned around and, lo and behold, he was right! The woman was wearing nothing under her suit jacket! Looking around the room, I saw that other women were proving that at Nobu no shirt does not mean no service (at least for the ladies). I thought to myself, if they can afford to order Otorro sushi at $25 a piece, then surely they can afford a few silk shirts. It was when that I first postulated a corollary to the hemline theory: The Cleavage Hypothesis. The Cleavage Hypothesis states that there is a relationship between amount of flesh that is fashionable to show under a woman’s suit jacket and the strength of the market: When the market is strong the cleavage line drops.

The Trader, realizing he would have another valuable trading tool if hypothesis held true, graciously funded my research into this theory. For a month I did nothing but read back issues of fashion rags and the Wall Street Journal. I developed what I call a flesh gradient; it’s a measure of the amount of skin showing in proportion to the woman’s torso. I charted both the historical measures of the flesh gradient (as determined by back issues of Vogue, Elle, In Style, Cosmopolitan, and other fashion magazines) and the corresponding historical measures of market strength (as determined by the Dow Jones, S&P 500, and the NASDAQ 100).

I am not yet at liberty to reveal the exact results of this analysis. Currently, The Trader and I are developing a set of analytics based on my research and we are hoping to license this tool to Bloomberg. In the meantime, we have reached an agreement with the authors and publishers of Long or Short and we are pleased to bring you this advance announcement of our forthcoming product. If you are interested in learning more about this product or would like to invest, please e-mail my proxy: Mr Juggles.

Recommendation: It is fashion week here in New York City. Already we are seeing a noticable shift in women’s business wear. Last year at this time, I would have recommended: short on collared blouses and long on double-sided tape. But designers such as Nicole Miller, Alexandre Herchcovitch, and Lela Rose are changing the market forecast. Personally, I’m holding on to my high yield stocks (and double-sided tape) through the spring, but I’ve set a sell point in August should the turtleneck futures market see a sudden jump in price.

Full disclosure: I have a long position in double sided tape.

Flagging the Market: Long the Danish Flag?

The answer is yes, according to Ahmed Abu Dayya, an independent souvenir shop owner & sometimes Long or Short Capital consultant. He lets his investment in a stock of Danish flags do the speaking:

When entrepreneur Ahmed Abu Dayya first heard that Danish caricatures of the Prophet Mohammad were being reprinted across Europe, he knew exactly what his customers in Gaza would want: flags to burn.

He sells his Danish and Norwegian flags for $11 a piece — a price he acknowledged might be dampening sales. Many protesters prefer to save money and make the flags themselves from scraps of fabric, he said.

Abu Dayya sources some of his flags from suppliers in Taiwan, but he buys Israeli flags from a merchant in Israel, even though he sells them to be burnt at anti-Israeli rallies.

Recommendation: This uptick in anti-Danish investing sentiment still has some legs. Technical charting indicate a rare double-swirl-crown-top, which has only been discussed in theory and never seen outside of experiments using Monte Carlo generators. Danish and Israeli flags are rated a strong buy with price targets of $16 and $19 respectively.


Products So Good They’re Dangerous

A recent lawsuit (see more details here) accuses Apple (AAPL) of making a product, the iPod, so compelling and feature-filled that it is dangerous to its user. In this case, the accuser claims the iPod’s massive capacity for tasty tunes of tempting him to listen so often and so loudly that the inevitable result was hearing loss.

[Item] 30. Compounding this problem is the [iPod]‘s capability to store and play tens of thousands of songs, giving the listener the ability to listen to seemingly endless music without any rest, and without giving ears a chance to recover.

As any MBA worth his salt knows, two data points make a trend — thus, I lump this lawsuit in with the obesity suits plaguing McDonalds (for producing too many delicious fried foods). And, taking into consideration the solid to stellar performance of MCD and AAPL over the last two years, I am now recommending Long or Short readers take long positions in any company producing a product so good it could be considered dangerous by ambulance-chasers or the abdication-of-personal-responsibility crowd.

Recommendation: Long AAPL, MCD and all other such producers. This also dovetails with our earlier analysis of the Idiot Demographic.


Long or Short Capital Reports Q2’06 Results

Long or Short Capital’s fiscal quarter ended on 1/31/06, and the company reported their results in a press release on their site:

Mister Juggles: “We completed a watershed first Half to our 2006 Fiscal Year. Q2’06 was our best quarter ever, thanks to the genius of management and a compensation package which continues to be heavily weighted towards long dated options in the company’s non-existent stock. We have an ever increasing amount of skin in the game so you should trust us, subscribe your friends to our site and find ways to generate more free cash flow for us which will turn into dividends for you.

We feel great about our 2nd quarter and our 1st half, and we came in at the high end of our recent guidance. We are also proud to have delivered cash earnings per a subscriberholder of negative $0.48 an increase of some sort of imaginary number over last quarter’s EPS of $Div/0. We have taken a cash hit from working capital due to our 79% quarter over quarter revenue growth. In response, we have taken the steps of sourcing advertisements from vendors with more favorable payment terms. This should lead to an opportunity for w/c to be a substantial source of cash going forward. We also enjoyed a nearly 50% increase in subscribership from 60 to between 85-90, breaking 101 at points.

Our marketing spend increased by infinity% quarter over quarter, a steep rise. Our “Project Propeller” brought in roughly 350 visits at a cash cost of $100. We expect it to continue to generate 100 hits per a quarter for 5 years, so we are looking at a visitor acquisition cost (VAC) of under $0.10 on a discounted basis.

We have transferred successfully to our new WordPress 2.0 Content Delivery Platform. And more noticeably, we have altered our storefront from longorshot.blospot.com to our new longorshortcapital.com site which is strategically located between longorshortcapitak.com and longorshortcapitam.com.”

Unaudited Financial Results for Q2’06

Income Statement

Contextual CPC Revenue $116.37
Static Ad Revenue $66.91
RSS + Referral Revenue $12.02

Total Revenue $195.30

Cost of Sales $55.00
Marketing Expense $100.00
Operating Income $40.30

Balance Sheet
Cash $29.69
Accounts Receivable $132.64
Inventory $0.00
Prepaid Hosting $45.00
Accounts Payable $0
Cash Flow Statement
Operating Cash Flow ($42.52)
Capex $0.00
Distributions $X.00
Performance Metrics
Visits 7,639
Pageviews 11,093
Clicks on ads 175
Ad impressions served ~42,703
Subscribers by Email 30
Subscribers by XML 55
Inbound Links per Technorati 60
Inbound Links per Google ~16 sites

“Readers are to submit questions by email to misterjuggles or in the comments section below the post; if we get enough questions and of enough quality we will post a quarter end conference email/chat thing that will allow all of the sell-side analysts out there to fill out their models with the really important metrics like ARPU, maintenance capex spend and whiskeys per post. We will answer all questions provided they inspire humor. Our updated dividends will be announced later this week, as soon as tomorrow, if JD wakes from of his alcohol induced slumber.”


Quotes Entirely Relevant to Investing

The Greatest Happiness is to scatter your enemy and drive him before you. To see his cities reduced to ashes. To see those who love him shrouded and in tears. And to gather to your bosom his wives and daughters.

-Genghis Khan


Clear Buy Signal for ORCL

A clear buy signal for Oracle (ORCL) is provided in a SF Chronic Article on Larry Ellison’s spending habits.

In e-mails, which stem from a recent shareholder lawsuit against the technology titan, Ellison’s accountant, Philip Simon, warns the billionaire about his habitual runaway spending. Like a concerned parent, Simon chides Ellison for overextending himself on a new yacht, on his America’s Cup team and on his new houses in Woodside and Malibu.

According to documents unsealed by a judge in the shareholder lawsuit, Ellison habitually pushes his credit limit of more than a billion dollars to its maximum to finance his yachts and homes. And that’s not even counting some $20 million a year he burns through in miscellaneous lifestyle expenses.

Ellison, who identifies strongly with the company he founded in 1977, has been famously unwilling to sell Oracle shares over the years.

Instead of selling them, he has financed his lavish lifestyle — the 23-acre Japanese-style estate in Woodside, the yachts, the airplanes, the Armani suits — by borrowing against his stock.

Getting back to the scary days of 2000, when the tech stock market was imploding, a list of Ellison’s debts as of July 13, 2000, showed that he owed $1.022 billion to five banks: JP Morgan, Bankers Trust, CMB, Merrill Lynch and UBS. At that time, those loans came from credit lines that had a combined limit of $1.35 billion, putting Ellison a mere $328 million from maxing out.

At the bottom of a document that detailed Ellison’s 2000 debt load, Simon had scrawled a rough accounting of Ellison’s lavish spending, according to deposition testimony:

“1) Life Style — annual $20m

2) Interest Accrual — annual $75m

3) Villa in Japan — $25m

4) New Yacht — $194m — over 3 yrs

5) America’s Cup — $80m — over 3 yrs

6) UAD — 12m over 3 yrs.”

It’s not clear what UAD refers to. Since this rough budget, Ellison has reportedly spent $200 million building a Japanese-style estate in Woodside, which includes a reproduction of a 17th-century Kyoto teahouse. He has also bought multiple properties in Malibu — $180 million worth, by one report.

Long or Short Capital LOVES stock secured debt loads incurred by CEO’s. What’s a clearer signal of a stock’s value than a CEO being willing to use it as collateral for a loan to build a $200mm replica samurai house in Northern California? As far as what UAD line item represents, my guess would be “Stanford Freshman Girls.”

Recommendation: Long ORCL per the Satan’s Portfolio investing thesis.


Incredibly True Quick Serve Restaurant Truths #2

Cedric Burgher, the most appropriately-named former CFO of Burger King, is now the CFO of KBR, the division of Halliburton (HAL) that does contingency support and various government subcontracting in Iraq and hotspots around the world. Burgher moved from one about-to IPO company in Burger King, to another in KBR.

This is one of the worst things to ever happen and we fully hope that Burger King will scour finance departments nationwide until they can secure a new Hamburger Helper substitute CFO. This “John Chidsey” guy will not cut it…unless he changes his name to Stanley Chicken Frye. Perhaps BK will just cut through the funny business and elevate The King from his SVP of Accounting role to CFO.


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