Long or Short Capital

Bob Murray, insane person and CEO of Murray Energy, a coal mining firm who owned the mine that collapsed in Utah, trapping six miners, has had a lot to say about the situation.

Corporate speak:

I don’t know if the miners are alive or dead, only the Lord knows that. But it is up to Bob Murray to get them out.
-Bob Murray CEO

Translation:

I am effing insane. The Lord knows this. These miners are screwed.

Corporate speak:

He also continued to insist that an earthquake, not a “bump,” caused Monday’s collapse. On Tuesday, however, Rafael Abreu, a geologist with the U.S. Geological Survey National Earthquake Information Center in Colorado, said a 3.9 magnitude event recorded Monday lacked the wave forms characteristic of a naturally occurring earthquake.

….

But Tuesday afternoon, Richard Stickler, the assistant secretary for the federal Mine Health and Safety Administration, told reporters gathered near the mine that “retreat mining has been done at this operation.”
–Salt Lake Tribune article

Translation:

The Lord knows this was not an earthquake.

Corporate speak:

You see, so-called “global warming” is a human issue to me, not just an environmental one.
-Bob Murray’s testimony before congress at a climate change hearing in March 2007(Link)

Translation:

A human issue for me, Bob Murray, owner of the 12th largest coal mining company whose entire business is based on digging up coal, which allegedly worsens so-called global warming.

Dear Valued Client:

Last week you received a letter from the head of Long or Short Capital Management, Mr Juggles. In this letter Mr. Juggles told you that although your money was invested wisely according to the prospectus, that money has subsequently disappeared. We wanted to write you to let you know that after further diligence this is 100% accurate. Your money is definitely, definitely gone, for sure.

The feedback we received on the previous letter has revealed that you are unhappy that your money is gone but you were especially upset with our refusal to accept responsibility for your money being gone. Well first we would like to remind all of our valued clients that you shouldn’t point fingers. This is not just your fault, it’s everyone’s fault. Even ours, just to a much lesser degree than it is yours( especially important point for you to take away). We have completed a detailed and rigorous analysis of whose fault it is and thought it was important to share the results:

The chart depicts graphically the small size of our fault. After further study it was determined that all of our market share of the fault stems from one person: Mr. Juggles. As of this morning we have resigned him. Kaiser Edamame, our Germo-Japo restructuring expert and portfolio manager of our anti-union humor portfolio, will take-over for Mr. Juggles effective immediately.

We have also implemented several restructuring measures to ensure that when your money disappears in the future, it is less our fault than it was this time. Starting on August 30th, before we invest in low-yield, illiquid securities with high default risk we promise to “think-twice”. This represents a 100% increase in the amount of thinking we have done in the past. Also, in the case of our most risky investments, before we increase our exposure to them we will now “sleep on it,” something we have not done previously. We feel confident that these measures will significantly increase your returns and hence our fees over time.

Please contact me with any questions.

Subprimely,
Johnny Debacle
EVP Long or Short Capital Managment

Natexis Bleichroeder is now Natixis Bleichroeder

Thank you Natexis Bleichroeder salesman for letting me know that Groupe Banque Populaire merged some of its operations with some of those at Groupe Caisse d’Epargne to create the new, improved Natixis Bleichroeder. I imagine that one letter change will make a big difference in performance going forward. I don’t remember doing any business or trading with you in the past but I’m sure that will now change.

IM conversations at leading funds:

Analyst: I think that this maker of ball bearings is quite attractive because of its strong operating momentum, $500mm net cash position, and dirt cheap valuation of 6x fully-loaded FCF.
PM: WHAT IS THEIR SUBPRIME EXPOSURE?!?
Analyst: They don’t own subprime. Or sell houses. Or sell into housing-related markets. Or have variable rate debt.
PM: OK BUT ARE THEY EXPOSUDED TO THE SUBPRIME PRESSURE ON YIELDS?
Analyst: No
PM: I LIKE THE NAME BUT WANT TO OWN IT 10% CHEAPER
Analyst: They’re buying back 10% of shares outstanding this year.
PM: WHAT ABOUT SUBPRIME? ANY EXPOSURE THERE?
Analyst is now offline

Dear Valued Client:

As you may know, the investment process has a normal course. Generally accepted investing practices follows that you, the investor, give us, the manager, money. As manager we take that money and buy something with it. This something generates profits and at the end of the year, we pay ourselves some dollar percentage of those assets, as well as some percentage of the generated profits. Everyone profits which is a good thing.

Unfortunately, the money you gave us did not follow this normal course. Per usual, we “invested” your money in tranches of CDOs comprised solely of loans to people who specifically would never be able to pay down their mortgage. Their inability to pay was the very thing that made these such great loans and allowed us to demonstrate to you a profitable two year record of performance. This could have continued but your money decided to disappear.

As far as we can tell, there is no current record that points to existence of your money. It’s no longer part of our assets under management. Look, it’s up to you how you raise your money and I don’t want to get into a nature vs nurture sidebar with you, our valued client. But don’t you think that maybe you should have imbued your money with more of a sense of sticktuitiveness? I mean, it literally seems to have vanished at the worst possible time, what with the depressed prices and attractive yields which now litter our market. This is when we could be printing profits for you (if only your money hadn’t disappeared).

I guess, for us, we’re disappointed in you. Your role is to let us take your money, assume none of the risk and allow us to give you some of the return. Don’t you see how this relationship breaks down if you allow your money to disappear? We’re not angry with you, just disappointed. It’s your loss, as we still earned our management fee, it just seems like a waste for you.

I have enormous confidence in Long or Short Capital management and the ability of our talented professionals to bring you the highest quality products and services now and in the future as they have in the past. You can count on us to deliver…if you don’t let your money vanish.

Sincerely,
Mister Juggles

Related: PDF of Bear Stearns Asset Management Letter via Dealbreaker.

Just got off the phone with the wisest lady I know and she had some key insights into the hot topics of our day:

On the state of the markets and her 401K allocation: “Well it seems to me there’s a lot of finagling going on, and I don’t like finagling so I sold most everything.”

On Hillary Clinton: “You know I’m a democrat but I just don’t like pushy women, no one does”

On Barrack Obama: “He seems like a great man but I don’t think he has a chinaman’s chance of winning”

Recommendation: After our discussion with this wise sage who is unaffected by consensual crowd mentality and political correctness we recommend selling the market, Hillary, and Barack Obama.

[Applied economics and policy analysis] boil down to three imperatives (ten little words).
1) at what cost?
2) compared to what?
3) how do you know?
Peter Gordon (Ht: Newmark’s door.)

Past Quotes Entirely Relevant to Investing

Long or Short Capital’s ascendancy began 2 years ago today, with this first recommendation. Anyone who heeded our advice squeezed tremendous hypothetical returns out of the citrus trade.

In this short period of time we have:

• Migrated our operation from Blogger.com to an enterprise solution
• Published hundreds of in-depth (or shallow) notes on the market
• Become the #1 abstract long or short investment advisory firm on the internet and in the world

For the next two years, our primary goals include:

• Piratery
• Replacing Hank Paulson as Secretary of the Treasury with Dr Deep Gupta
• Gain acceptance of SAAP such that we are finally able to IPO on the NASDAQ

You are welcome for providing two years of an incredible investment commentary and analysis.

The market sagged like grandma due to credit jitters, subprime worries, a lack of PE activity, a collapse in bond prices, non-double digit earnings growth, China, Russia, a superspike in the price of indium, the stupid ending of the Harry Potter book where he wakes up and it’s just a dream and Voldemort is his dad (spoiler alert), and a realization by the market that no matter how high she goes, people will still see her as a failure if she has an off week. She is the hardest working woman in stock business, give her a break.

KKR (Sorta listed in like Amsterdam or some shit): Jealously eyeing Blackstone because they were able to pull off their IPO at a peak.
Market Impact -75

Blackstone (NYSE:BX): Jealously eyeing KKR because they were unable to pull off their IPO and thus are not exposed to the judgement of the plebes.
Market Impact -100

Every other PE firm — Jealously eyeing KKR and Blackstone for being incrementally more prestigious than they.
Market Impact -300

Chevron (NYSE: CVX): Chevron continued investing in production facilities for it’s “Blind Faith” field in the Gulf of Mexico. First drilled in 2005 there is little to no evidence that oil reserves will be discovered. When asked why the company was spending so aggressively on this speculative field they responded “Go ahead, don’t believe us, that sure worked out well for Doubting Thomas didn’t it? Just because you can’t see the oil doesn’t mean there isn’t any, that’s what faith IS, duh”.
Market Impact -20

The Actual Economy: Hey guys, I’m doing great! Why y’all look so glum?
Market Impact -400

Anti-market forces have realized that the best way to fight low wages is to hire people at low wages. After all, protesting is boring and somewhat demeaning for a union member. So it’s much more efficient to hire homeless and transients. If only there were more Mexicans in DC…

Outsourcing the Picket Line

The picketers marching in a circle in front of a downtown Washington office building chanting about low wages do not seem fully focused on their message.
…
Although their placards identify the picketers as being with the Mid-Atlantic Regional Council of Carpenters, they are not union members.

They’re hired feet, or, as the union calls them, temporary workers, paid $8 an hour to picket. Many were recruited from homeless shelters or transitional houses. Several have recently been released from prison. Others are between jobs.

“It’s about the cash,” said Tina Shaw, 44, who lives in a House of Ruth women’s shelter and has walked the line at various sites. “We’re against low wages, but I’m here for the cash.”

Ht: marginalrevolution

When the Justice Dept won its antitrust case against AT&T, the company was split into multiple local operating companies. AT&T focused on the long distance market. Now, those companies have recombined to the point where only three remain: Verizon, AT&T, and Qwest. Essentially, the old AT&T has been reformed in three geographic regions. Why is this? Because of the Regulatory Inefficiency Theorem.

The Regulatory Inefficiency Theorem states that any move by a regulator will thereafter be reversed by the market. The time to reversal will vary inversely with the amount of regulatory oversight implemented whereas the lobbying dollars spent will vary directly.

In the case of telecom — an industry with large returns to scale — there is more regulatory oversight than almost any other industry. And, as our RIT model predicts, we observe a near complete reversal of the regulator’s actions over time combined with immense lobbying efforts. In fact, according the Post, the telecom industry spends more on lobbying “than the tobacco, aerospace and gambling lobbies combined.”

Click through for whole chart

Source Freepress.net

When something is empty, fill it. When something is full, empty it. When you have an itch, scratch it.
Dieter Dengler in Rescue Dawn

Past Quotes Entirely Relevant to Investing

Very suddenly it came, and without forewarning of its nearness, a horror of hellish red light, swift as a wind-blown flame, that leapt from the market’s gloom and sprang upon us where we stood. We saw, in a floating redness as of ghostly blood, the black and semi-serpentine form of the Subprime Exposure. A flat and snakish head, without ears or nose, was tearing at our portfolio’s armor with sharp, serrate teeth. I heard the teeth clash and grate on the tiering credit protection of our CDO.

Swiftly I laid the ring of Greenspan on a stone I had placed in readiness, and broke the dark jewel with a blow of the Hewlett-Packard financial calculator which I carried. From the pieces of the lightly shattered gem, the disemprisoned demon rose in the form of a smoky fire, small as a candle-flame at first, and greatening to a spinning inferno. Hissing softly with the voice of fire, and brightening to a wrathful, terrible gold, Greenspan leapt forward to do battle with Subprime Exposure, as he had promised me, in return for his freedom after cycles of captivity.

Greenspan closed upon the Subprime Exposure with a vengeful flaring, and it relinquished our structured product, writhing like a stern bear struck by a cannon. The body of the Subprime Exposure convulsed loathfully , and it seemed to melt in the manner of wax, changing horribly beneath the flame as it undertook an incredible metamorphosis. Moment by moment, the thing took on the wavering similitude of man.

The unclean blackness swirled, assuming the weft of cloth amid its changes, and becoming the folds of a dark suit such as worn by a government official or conservative business executive. Then, above the cravatte, a face began to peer. The face, though shadowy and distorted, was that of Bernanke. The fire-shaped Greenspan assailed the abhorrently transfigured thing, and the face melted again into waxy blackness, and a great column of sooty smoke arose, followed by an odor of burning flesh. And out of the volumed smoke, above the hissing of Greenspan, there came a single cry in the voice of Bernanke.

Yahoo (NASDAQ: YHOO) benefited from a Carly Catapult when they announced that they had replaced Terry Semel with Jerry Yang as CEO in June. Little did they know that their incoming CEO (informer) was a poker junkie with a serious lack of focus. Jerry Yang has spent the last week plus holed up in a casino and competing in the World Series of Poker, the seminal annual poker event.

You can google this (Yahoo won’t get you the same results because it sucks) and you will see it is true. We did and it is. It is no coincidence that Yahoo stock is down ~5% today as of this updated writing and it is no wonder why Yang says he will need 100 days to do a “strategic and operational review” of the firm. How many of those days will be blown on his infamous poker benders?

Recommendation: While we commend the sheer hubris of taking a week off work as head of one of the largest internet companies to compete in the WSOP, is this really what serves shareholders of Yahoo best? Short YHOO.

Note: This recommendation was filed yesterday based on yesterday’s prices. We have predicted the future, in the past, because we are smarter than you.