Archive for September, 2008

Paulson, the First Subprime-Baller?

Paulson says “[the bailout bill] is much too important to simply let fail. We need to work as quickly as possible. We need to get something done.

He can’t get IT done, but he thinks we need to get SOMETHING done. That is decidedly NOT getting IT done.

Recommendation: If you are planning to build a CDO where the underlying assets are Hank Paulson Paper, good luck with that. And no, we have no interest in the equity tranche, the AAA tranche or any other part of the structure, thanks.

Dear Hammer

Dear Hammer Paulson,

I’m sorry Hank, it’s not you it, it’s me. I have been violently ill all morning after playing “donkey races” on Sunday. Tequila, speed and tenacity are at once a great combination and a miserable spectacle. Exclusively the latter the next day. And my puking all over your bailout plan has nothing to do with its merits. It looks great, a good win for you and you should be proud. Seriously, good stuff. Like I said dude, donkeys races. Blame the donkey races. I’m sure I’ll be fine by like tomorrow. Or 2014.

T. Market

Do Charles Tyrwhitt shirts destroy shareholder value?

Submitted by user KB

A geographic information system correlation analysis

Fact: Charles Tyrwhitt New York City store #1 is located at Madison Avenue & 46th Street, on the ground floor of the ex-Bear Stearns corporate headquarters

Fact: Charles Tyrwhitt New York City store #2 is located at 7th Avenue & 50th Street, on the ground floor of the ex-Lehman Brothers corporate headquarters

Fact: Bear Stearns is toast

Fact: Lehman Brothers is even toastier

Discussion: While further research is required to determine the exact linkage between Charles Tyrwhitt shirts and recent examples of the massive evaporation of shareholder value, the correlation trend is undeniable. Potential catalysts for Charles Tyrwhitt based shareholder value evaporation include bank risk officers spending their afternoons perusing between 100s of shirts in various cuff, collar, and color/stripes combinations instead of properly valuing CDO securities, an “uppity” British attitude permeating the entire building like the smell of a “5-dollar footlong” from Subway left to rot hidden inside the desk of your work nemesis, or some other, more sinister reason. Our crack team of CFA-certified researchers in Mumbai will stay up for the rest of the month running numbers to further isolate the direct causation between value evaporation and Charles Tyrwhitt, so please look out for our next research blast.

Recommendation: Short anything with a geographic proximity to Charles Tyrwhitt.

Leader of the *Free* World?

Sept. 18, 2008 — UK bans short-selling of financial stocks
Sept. 19, 2008 — US bans short-selling of financial stocks, requires reporting on all other short sales
Sept. 26, 2008 — China approves short-selling and margin accounts for first time in order to develop market

Recommendation: Short the US & EU. We are regulating ourselves out of existence while China and the developing world moves in the other direction.

The Bailout, A Play

Scene 1

A dark stage, with a single spotlight on Henry Paulson

Henry Paulson: Good morning, ladies and gentleman. My name is Henry Paulson and I run the Treasury. And I don’t mean to make you panic, but if you do not give me a balance sheet that can hold $700 billion on it, and unlimited funding, than the economy will die. That’s right it will die. I don’t mean to cause fear and panic, but those are the only two legitimate reactions you should be feeling right now and you should let those guide you. Let them flow over you, sucking you into my myopic morass which now shrouds my former optimistic obfuscations.

Ben Bernanke: Every other economist disagrees with this proposed bailout but I believe in fear and panic and am drunk on the wine of my new powers. I too must insist that you, the fine people of this country, please give into your fear and panic. It worked in dealing with 9/11, it worked in getting us into Iraq, it worked in re-electing George Bush and now it will work in bailing out this economy. You don’t want it to DIE, do you?

Barney Frank: (Looking disheveled with a bad teen moustache) Blahrm-bram blrankrtrtyc encncmmphphphgh nbmmanana. Bragblahma ththtlthabzzzgh ndragh plghtythmrhm phjalth.

George Bush: I know nothing, if not fear and panic. Trust me, we need this.

Violin solo in the background playing the Vivaldi classic “Short Term Political Cycles Are Mismatched With Jobs Charged With Making Decisions That Have Effect Decades Later”

Congress: FEAR. PANIC.

The Economists: NO!

Congress: FEAR. PANIC.

Wall Street: FEAR. PANIC.

All players dancing on the stage surrounding The Economists who disappear into the floor

Scene 2

A Rational Man: Do we need this?

Henry Paulson: Yes, I need this.

A Rational Man: I said “we”.

Henry Paulson: And I said “I”.

A Rational Man: What will this do? Honestly, I’m a Rational man, thus I have no vote.

Henry Paulson: Maybe, maybe might unfreeze the interbank market.

A Rational Man: But will this save us from recession?

Henry Paulson: No.

A Rational Man: But will this lead to massive inflation?

Henry Paulson: Almost certainly.

A Rational Man: And what about the unknowable second order effects, or third order effects, or x order effects?

Henry Paulson: I ignore them.

A Rational Man: So this bailout is a longshot to do anything positive and it increases the downside risk if it doesn’t work?

Henry Paulson: That is what our math tells us.

A Rational Man: Is this socialism?

Henry Paulson: No, this is necessary.


The Demise of PE: Advertising

Some investors consider sales and marketing expense to be a real investment. If a company is building its brand, it’s building its barriers to entry. Now we know why the private equity funds are doing so poorly. Cerberus and Sears (NASDAQ: SHLD) (now Eddie Lampert’s investment vehicle) have been decreasing their advertising spend…their barriers to entry must have come down shortly thereafter. Looking at the top advertiser through, PSAs, I am confident that Government and wish-washy non-profit organizations will continue to grow…their moats are getting larger.

PE Ads

Kenyan Investment Scam on Capital IQ

Submitted by user JS

This is actual e-mail I got sent via Capital IQ, completely unsolicited. I work for a large public mutal fund company. The next note will be one asking me to cash a check for him for $1 million dolalrs…


I am writing to enquire whether you’ve had a chance to look at our equity research notes uploaded on Capital IQ. If you’ve not, kindly take some time to look at it or, if you prefer, I could email then to you directly.

Our firm is an investment bank, member of the Nairobi Stock Exchange, in Kenya. We are among the leaders in corporate finance, research and brokerage.

We could work with you to identify and unlock value for your funds right here in our market. Our market currently has attractive bargain opportunities, and being a frontier/emerging capital markets presents portfolio maximization advantages as follows:

(i) Largely uncorrelated to developed world capital markets

(ii) Driven by the pace and momentum of economic development in the economy: which has a very long way to go.

(iii) Listed stocks are in the very strategic and high-growth sectors of the economy whose growth trajectories are much higher than general economic growth rates.

Kindly get in touch with me to explore how we could incept beneficial relationships between our two firms.

Kind regards,



[Redacted] Investment Bank Ltd


Nairobi, Kenya

Tel: [Redacted]

Cell: [Redacted]

Quotes Entirely Relevant to Investing 09-21-2008

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
-The Bailout Proposal

Past Quotes Entirely Relevant to Investing

Bailing Out the Bailer-Outer

Today the US treasury announced they are bailing out the federal reserve bank. They are concerned that the federal reserve bank – after taking over the debt of Bear Stearns, Fannie, Freddie, AIG et al. is “over-leveraged”.  The obvious question is, who will bail out the Treasury?  The answer is paper.  More specifically the “Bureau of Engraving and Printing”.  We are so long the Bureau of Engraving and Printing as we see it as the only financial institution in the country that will always “find” enough liquidity to fund itself.  If you’d like to get long them we recommend you check out  Yes that’s the real name of their government website.  Money doesn’t grow on trees, but you can cut the trees down send them to a money factory and presto pronto prego DINERO!

Recommendation: In any mania, don’t invest in the company that mines the “gold”, buy the company that supplies the “shovels” and “picks”.

If He Is Insuring You, and You are Insuring Her, Who is Insuring Him?

AIG (NYSE: AIG) is now a subsidiary of Paulson Inc, because despite being in the insurance business, AIG had a common failing of man — the inability to look within and accurately assess one’s self. But what I don’t get is why AIG didn’t just insure itself. If I were in the insurance racket, the second thing I would do would be to make sure to write an insurance policy for myself. The first thing I would do would be to leverage my expense account into a huge birthday party featuring hookers, blow, ice sculptures and midgets in Sardegna. But the second thing would definitely be the whole insure myself against ever losing money. Actually that would be the third thing. First would be the hookers and blows, second would be insuring my privates, third would be insuring myself against ever losing money.

I mean isn’t that the whole point of insurance? To make someone pay too much so they don’t have to worry about something. Well I figure being AIG, I’d be an insider and be able to cut myself a deal and not make myself pay anything at all for being insured from ever not making money.

Recommendation: If you can’t insure yourself, who can you insure?

Negotiating with Kenny Lewis

Kenneth Lewis is the CEO of Bank of America (NYSE: BAC).
John Thain is the CEO of Merrill Lynch (NYSE: MER).
A Fruit Vendor sells fruit. For a living.
A Supercuts cashier works the register at Supercuts. For a living.
A Drexel, is a white pimp/drug dealer who thinks he is black and is played by Gary Oldman.

John Thain: Kenny, I know you’ve had enough fun in investment banking, but we are in a lot of trouble here, and I’d be willing the firm to be sold at our Friday close just to give us some stability. $17 per share is fair and you guys can have a couple weeks to check out our books which you must be curious about.

Kenny Lewis: And $29 per share is a higher prime number — Let’s do that!!! Also, we must not wait, we must do this RIGHT NOW, no time to look at those books — who cares what’s on them anyways, not like we have the people to be able to get behind that junk. We bought Countrywide for chrissakes!!!! But we do know that by paying more for a falling knife, you get a sharp increase in prestige and it makes it seem like you weren’t some idiot going in alone and bidding against ourselves. It worked with Countrywide it will work with you guys!

John Thain: You, sir, have a deal.

Kenny Lewis: One thing I would ask Johnny boy is that you get a blindingly orange tan — it helps distract people. When you got the salon, ask for “The Mozilo”.

Fruit Vendor: This is my last orange, as you can see it’s bruised and damaged and, between you and me buddy, I am probably going to throw it away at the end of my shift. I’ll sell it to you for a quarter.

Kenny Lewis: I WILL PAY $1 FOR YOUR ORANGE BUT YOU MUST ACT NOW!!! That orange is the perfect strategic fit for my oranginization and I must have it. It’s even more perfect than the fit of that kumquatwide I bought last year!! Delicious!

Fruit Vendor: You, sir, have a deal.

Supercuts Cashier: Sir that will be $13 for your haircut.

Kenny Lewis: You think the guy in the $5000 pants is gonna pay $13 for a haircut? Come on!!! *As he flings a $100 bill at the cashier*

Supercuts Cashier: You, sir, have a deal.

Drexel: What we have ere, Kenny-boy, is what I like to call a CONundrum. Here is me, having access to this fine fine female over ere and there’s you, dumb-ass white-boy in a suit ain’t even paying no mind to the world of trouble you about to be in if you start up like Charlie Bronson. So looky ere, Kenny, I ain’t go not beef wit you, I just wan’t to make sure my employee gets paid what she worth. $1000, up front.

Kenny Lewis: Drexel, I didn’t come here to haggle, I’ll pay two grand in cash plus another grand in BAC shares for an “around the world” with Trixie over there.

Drexel: You, sir, have a deal.

Melissa Moody’s Ratings Alternative Alert: OMG OMG OMG

Lehman (NYSE: LEH)
Washington Mutual (NYSE: WM)

Previous Rating LEH: BFFLAF
New Rating LEH: ?

Previous Rating WM: BFFLAF
New Rating WM: ?

Has anyone seen Lehman (NYSE: LEH) or WaMu (NYSE: WM)??? I am so worried about my girls, I can’t find them anywhere and they are not picking up their cell. So the backstory is that we are all out last night drinking at Normal & Unwealthy’s, the girls’ goto bar. Us girls were dancing up a storm, letting our hair down and getting our freak on!

Well Lehman and WaMU, when they get a little drunk and are in front of guys, they get into kissing each other a little. Totally not for attention!!! They do it because sometimes it’s nice to kiss a girl and they both think each other are so beautiful and they are!! They are so crazy and original, I don’t know why none of their relationships seem to last!!

Anyways, next thing I know, some really old guy (he must have been at least like 30 or even more ancient!?!) with a shaved head and glasses is behind them and grinding them both. He was in a suit and moved like Frankenstein and looked totally out of place, when a popped collar or three is all he really needed. It was also weird because I’ve never seen him around them before but he used to hang with this other girl Goldman, who is a slut and a whore but very rich. But that was like years ago!!!

So, like, this guy, he’s grinding them and they are both a little out of it at this point, and when I like come back from a trip to the bathroom, they aren’t there!!! Please if anyone has seen my friends Lehman or WaMu or knows what happened to them, text me, Melissa Moody, and let me know what happened to them. I’m so worried!!!!

Ratings Methodology:
Hey everyone! It’s me, Melissa Moody…not that other Moody’s you have been reading about. Actually that’s why I’m here I’m just so sick and tired of that other Moody’s! Their ratings stink, and they don’t know nearly as much as I do about debt, it’s true, I’m maxed out on 4 out of 7 credit cards I know I have a problem but I just can’t stop,ha ha. I can do a better job than Moody’s and that is what I’m gonna do! And let’s face it, their old ratings were too complicated. I mean Aa3, Baa1, Caa2, B1 who knows what that means? My ratings will be simple:

  • BFFAE (Best Friends Forever and Ever)
  • BFF
  • BFFLAF (Best Friends For Like Almost Forever)
  • BFFBAS (Best Friends Forever But Also a Slut)
  • BFFBIHH (Best Friends Forever But I Hate Her)
  • Whore

September 2008 LHC End of the Universe Puts

While your portfolio (and less importantly, existence itself) has survived the first test as the Large Hardron Collider was flipped from “Suck” to “Blow” this morning, who is to say that a small mini-blackhole here or there is NOT sucking the earth into its dense core as we speak? Not us. We continue to reiterate the importance of LHC End of the Universe Puts.

“The LHC is a discovery machine,” said CERN Director General Robert Aymar

If this is true and you extrapolate it out, it is only a matter of time until they discover the end of the Earth and existence as we know it. Who is to say they won’t do that tomorrow? Again, not us.

Recommendation: These securities do NOT benefit from the implicit guarantee of the US government, God or your locally relevant deity. Wink wink nudge nudge, but between you and me, they DO.

A Letter From Hank

Dear US Taxpayer,

I would like to congratulate you on your recent purchase. I am glad I was able to convince you that now is the ideal time to offer an uncapped backstop on a $5.2 trillion book of mortgages. We here at the Treasury Dept (along with our sisters over at the Fed), appreciate your repeat business. I am confident that this acquisition will be a profitable one; perhaps even more profitable than your recent purchase of JPMorgan’s Bear Stearns’ liabilities!

Please know that we are actively seeking more deals on which we can work together. I am confident we will find more interesting opportunities before the end of the year.

Yours Truly,
Hank Paulson

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