Long or Short Capital

Submitted by reader MGW

The vatican has issued a new list of seven deadly sins. The updated sins include:

1. “Bioethical” violations such as birth control
2. “Morally dubious” experiments such as stem cell research
3. Drug abuse
4. Polluting the environment
5. Contributing to widening divide between rich and poor
6. Excessive wealth
7. Creating poverty

Recommendation: The publication of these new sins has led us to upgrade all of the firms listed in Satan’s Portfolio to date from “Yes” to “Double Down”. As these firms surely commit at least one of these new sins, we expect they will realize significant previously unbudgeted “sinergies”, boosting valuations across the whole class.

Also, we are downgrading Wall Street firms to “Manual” down from “Spit” in light of the fact that they appear to be reformed sinners, the kind which have no place in Satan’s portfolio. Though they once “contributed to the widening divide between rich and poor” and created both “excessive wealth” (think Stephen Schwarzman) while also “creating poverty” (think everything they do to other people who aren’t either them or Stephen Schwarzman), their recent sub-prime losses have resulted in them actually narrowing the divide between rich and poor while destroying a whole lot of excessive wealth.

Submitted by reader “girl”

In response to the original The Attractiveness Scale which broke down all man to woman (M2W) relationtships, reader “girl” (of Market Clearing Attractivness fame) has countered by also reducing all woman to man (W2M) relationships into a simple easy-to-follow chart with a distinct NY bias. We endorse all attempts to simplify all complicated human interactions into charts and numbers. Especially when they are dead on accurate.*

*Except of course, with respect to our staff. We are not reduceable to simple easy-to-follow charts. We’re deep and complex, but also sensitive, but also still masculine and would make great fathers in addition to great providers. And we would never frequent high price hookers, except for special occasions like “Saturdays”.

From Marginal Revolution comes news that the Dutch were fooled again and fell victim to the siren’s song of tulip bulbs:

Over here in the Netherlands, court proceedings are starting this week on the “biggest speculation fraud ever in the Netherlands”, according to a national newspaper that ran a big story about it today. Investors have lost tens of millions of euros in what turned out to be a big pyramid scheme.

Now for the ultimate irony. Any idea what these people were investing in? Tulip bulbs. Really.

Recommendation: These investors committed Number 37 of The 63 Classic Investing Blunders: Never invest in tulip bulbs in the Netherlands. Listed right after Number 36 — Never Invest Money with Orange People.

Good afternoon.

As some of you may know, I’m Eliot Spitzer, and I’m a big deal in this city, the fine city of New York. I’m also a big deal in the state that bears the same name. Let me first state that I will not address whether the smirk on my face is or is not, depending on what the definition of “is” is”, related to anything going on below your viewline at the podium.

As you can see from my hand gesture, I was involved in a prostitution ring. No this is not how I actually got “involved with” the prostitution ring nor how I held my…gavel.

Regardless of whether I was merely a participant, the ring-leader or a prostitute, I hope that you, the public, will not let this stand in the way of my role of making New York the best state in the union. I hope to assuage any fears or concerns as to my involvement by giving you the facts of the matter.

Let’s get to it.

This is how big I was…to the prostitution ring. Yes I was closing down other prostitution rings while frequenting this prostituion ring, but I assure you this is normal for attorney generals. It’s standard operating procedure.

This woman was in the ring. Julia’s a university student who the Emperor Club rated as “three diamonds” out of “six diamonds.” Great girl.

This woman was not in the ring.

This woman was definitely not in the ring. I fuckin’ swear it.

For a fee, they’d let you touch it.

For a larger fee, they’d let you juggle it. Sometimes a motor-boat would be included gratis.

This was one of my favorite positions. As you can see, you have a lot of control and a full view of the landscape. Sometimes I’d lay a little slap on either side, firm but fair, just to let them know who the law was. This cost $5,500 per hour.

Uhh, so uhh as you can, uhh no big deal, uhh right, hahahah…ha…ha?

My wife is staring at me, isn’t she. Who brought HER here?

Hmmmmm.

(Eliot, you must think of a plan to save your job)

If children still endorse me, sweet adorable innocent children, then I clearly cannot be so bad. Clearly.

You told me that would work. Asshole.

Uhhh…..

Leverage kills.
-The Market

Past Quotes Entirely Relevant to Investing

Zimbabwe continues to get it. When facing simple, but large, macro problems, the country shines like no other. The biggest problem with with supply and demand is that sometimes the demand cannot afford the supply. Zimbabwenomical solution? Enact policies consistent with Mugabe Efficiency Theory which lower the price of supply to make it affordable. The country is faced with rampant poverty and lack of wealth. Zimbabwenomical solution? Mugabe has taken it upon himself to make the entire country full of millionaires, an unprecedented accomplishment, not only in Africa but in the whole world. From a CNN article on the Zimbabwean dollar

Money traders in [the] African country say the Zimbabwe currency has [surged] to a record [of] 25 million for a single U.S. dollar.

It’s a race between the US and Zimbabwe, one the latter is clearly, and as a US citizen disappointingly, winning.

Later in the same piece we spotted evidence of another advance in the field of Zimbabwenomics:

[The] regional breadbasket [imports] canned and processed foods, household goods, soap, toothpaste, toiletries and other items [from] neighbors Malawi, South Africa and Zambia and from as far afield as Egypt, Germany, Iran and Malaysia.

Zimbabwe is not only reaping the benefits of trade by engaging in a diverse set of trading partners, but it’s taken a figment of its own imagination, and profited from it, by trading with a fictional country in Malawi. Zimbabwe’s move is particularly bold in that Malawi doesn’t even sound like a real country, more like someone with an oversized tongue trying to say “mara, way!”. The key benefit to trading with a fictional country is that you control the terms and have all the leverage because, in order to continue to exist, they are dependent on you believing that they exist. This is why the US is able to extract such generous terms in its trade with Canada.

Recommendation: Zimbabwe is on the very cutting edge of progressive thinking; we would buy the whole country if we could. Actually, according to our trader, apparently we now can. Amazing.

From JasRas in the discussion thread of this Big Picture post called Bernanke to Banks: Take the Hit:

“From the makers of TIPS, now the TRP: The Treasury Reduction of Principal Mortgage” now we protect you from inflation and deflation! Don’t worry about buying something at the peak anymore, with a TRP we’ll absorb the declining value so you don’t have to!”

Recommendation: It’s only a matter of time.

According to the un-Fed, inflation is rampant in the US, where the cost to fill the average tank of gas is close to the price of taking a family of four hundred to see Hannah Montana 3-D. It is becoming clear that this inflation is not contained within the US, western hemisphere or even the land-based area of Earth. It has spread to the waters that lap up to our financially underwater beach properties — the underwater world. This CNN story outlines how inflation in octopus leg costs has literally crippled an octopus, making him into a hexapus.

British marine experts have found what they claim is a world first — a six-legged octopus, or “hexapus,” whom they have christened Henry
…
Octopuses are renowned for having three hearts and blue blood, but not usually six legs.

While this is only anecdotal evidence it is startling; Henry isn’t even a lower class octopus who would always be scrimping and saving to fund his legs and would be the first to feel the impacts of inflation. Henry is actually a blue-blood british octopus, who should have no problems sourcing legs in any part of the cycle, absent some sort of hyper-inflation. We can only speculate that Joe Octopus is now Joe Pentapus or Joe Quadapus.

Recommendation: Octopuses are a large component of the cephalopod index, but a less crucial part of the squid world domination investment thesis that we have outlined in the past. There are no measurable signs that the squid economy is being impacted by inflationary headwinds, but we have been and will monitor the deep sea situation with our ROV Longus or Submersibilius which has been launched from Juggles’ mega-yacht currently moored in the Indian Ocean. We continue to be long the greater cephalopod index; a catalyst for revising our opinion would be evidence that the average squid is no longer able to afford a razor sharp beak.

HT to reader Lumpen

Compare and contrast these two pieces of analysis:

The Customer Service Elite (scroll to #19)

“Smith Barney, Why do you hate your customers?” A Play by JD

Notice how one has fancy pants charts, fabricated statistics and a penchant for speaking untruths, while the other tells of the plights of the common man, in play form no less.

Recommendation: We’d short Businessweek but as far as we can tell there aren’t any shares left to borrow.

HT to Anal_yst

Long or Short Capital Released this statement on Monday.

“Long or Short Capital is now present on Twitter. Based on the fact that one of our main contributors uses it, we estimate that at least one of our readership uses it. We don’t know if any of our other readers are on Twitter, or use it, or care if we are on it. We do know that it’s likely that if you are on Twitter and formally didn’t care if we were on it, you now do based on our tacit mutual acknowledgement of our superior smarts.

For a little background, Twitter was started in 1904 by Dean Twitter as a cooperative insurance organization for car-owners. It developed into a competitor to car clubs such as AA, but also branched out into various insurance businesses and of course, stock brokering. The depression happened and that was bad for Dean Twitter, as it was for many people. Then in 2006, Twitter scrapped all of its successful existing businesses and invested all of its capital in creating a Web 2.0 social web-app that allowed for users to communicate with one another in a way somewhere between a blog, a chat-room and IM. This is called tweeting.

To follow us on Twitter, log on to AOL and navigate to keyword Longorshort on Twitter.

Our twitter strategy is currently as mature as our humor, so we are not sure to what extent we will make use of the platform, if at all, other than as currently represented. Despite this, we expect analysts to raise forecasts to much higher levels, and frankly, this would really help me a lot, because I plan to sell a lot of company stock and would appreciate the bump. [Gracias muchachos] [Spanish Editor’s Note].

Mr. Juggles”

But here’s my advice to the rest of you: Take dead aim on the rich boys. Get them in the crosshairs and take them down. Just remember, they can buy anything but they can’t buy backbone. Don’t let them forget it. Thank you.
-Herman Blume in Rushmore

Past Quotes Entirely Relevant to Investing

Ben Bernanke’s speechwriter’s first draft for a Monday morning pre-market open speech.

Good morning. There has been quite some concern about the general economic outlook of America. There also has been quite some concern about the existence of inflation. We will ignore the latter for the time being, at least until Zimbabwenomics is better understood and appreciated by the public. Let’s focus on the general economic outlook, and by that, I mean the stock market.

If we let Friday exist, it will distort comparisons with prior years and also it meant that markets went down a lot. And to that I say, not on my watch, sir, not on my watch. So expect all your portfolios and investments to be reset to their close of business Thursday values very soon. And remember, who loves you? I do. Thank you.

One corollary to the Regulatory Inefficiency Theorem (RIT) is that as regulations increase, attempts to circumvent the rules increase. In fact, if you are the first or the only company to find a loophole, the regulations can form a competitive barrier.

For instance, this old WSJ highlights the restrictions on outdoor advertising and companies attempting to get around them.

Local laws here generally ban billboards in areas deemed residential. But that hasn’t stopped an outdoor advertising company called Van Wagner from plastering hip neighborhoods like Chelsea, Soho and the Meatpacking District with bare-chested pitchmen for Abercrombie & Fitch, dancing iPod users and other immense ads.
The catch: a loophole in the law that allows billboards in areas once zoned for manufacturing — even though the factories are long gone.

…

Outdoor advertising companies frequently play cat and mouse games with city officials. In California, for example, a state law allows illegally erected billboards that manage to avoid citation for five years or more to be considered legal….One Los Angeles-based company, Regency, repeatedly lands in hot water. On New Year’s Eve 2004, a deputy manager for the city of West Hollywood caught company officials, led by co-owner Brian Kennedy, installing a large unpermitted billboard on the Sunset Strip.

In response to this game, companies like Truck Ads have created new real estate for advertising by looking at non-traditional sources, mobile ubiquitous ones.

We see a new opportunity for advertising real estate: People. Think about it, people are everywhere. Moreover, they move and they enter areas previously closed off to advertising. This has started in some form with sponsorships; you can’t advertise at the Masters but Tiger can wear a Nike sweater. But we suggest taking it to the next level the way GoldenPalace has.

GoldenPalace.com, the online casino famous for turning eBay into the ultimate advertising vehicle by acquiring several outrageous items is at it again. They have paid $18,000 to shave a woman’s head and permanently tattoo “GoldenPalacePoker.com,” the website of the popular online poker room, on her bare cranium.

Recommendation: We did some preliminary due diligence several years ago involving paying homeless people to do our advertising bidding and also on unions and causes outsourcing protesting to the homeless. We now recommend management buyouts of individual people. After permanently tattooing them with corporate advertisements, these people can be spun back out for their original value (minus a bald cranium discount). As long as corporate advertisements are trading higher than bald cranium discounts like they are right now, this is arbitrage heaven.

From a Bloomberg piece on the risk of another off-balance sheet (in this case, a VIE) potential problem for financial companies:

Predictions for losses vary widely because banks aren’t required to specify the type of assets being held in the VIEs or how much they are worth, said Tanya Azarchs, managing director for financial institutions at S&P.

“The disclosure on VIEs is hopeless,” Azarchs said. “You have no idea of the structure or how that structure works. Until you know that you don’t know anything. It’s like every day you come into the office and another alphabet soup has run off the rails.”

Tanya baby, I’m not gonna say you’re not doing your job, but uhh, you’re not doing your job! How can you rate companies and then admit you don’t know, and haven’t known, anything? And she is the HEAD for ratings of financial institutions.

From her bio at S&P

A managing director at Standard & Poor’s Financial Services Ratings Group, Tanya Azarchs is responsible for coordinating research on issues affecting financial institutions worldwide. She frequently authors research on special topics. Tanya is responsible for the ratings of large, complex banks and securities firms in the U.S. and Canada, and is involved in the analytical effort on Eastern European banks. She is also a member of the global financial institutions ratings criteria board, which develops ratings criteria and reviews ratings across the globe for consistency.

Why would someone like that think it’s ok to put out ratings when they lack knowledge?

She is a Chartered Financial Analyst.

Ahh, so knowledge IS a problem.

Recommendation: Short the balance sheet for any entity that has a lot off-balance sheet.