Long or Short Capital

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

User Submitted by A Paleolithic Fish

On the Piratery Corp Inc conference call, I think Crumpacker missed a major point. It seems evident that one external factor is driving both the increase in global warming and the decrease in global piracy. I’m speaking, of course, of the rise of our cephalopod overlords.

Obviously, cephalopods must be behind global warming. As our soon to be VP/chief science expert Sarah Palin tells us, humans have played no part in the dramatic increase in global temperature since the industrial revolution. She understands the obvious motive that Cephalopods have for inducing more warming: higher sea levels. How better to expand squid market share than by increasing the size of their domain? When manhattan sinks beneath the waves, cephalopods will laughing all the way to the (undersea) bank.

Of course, squid have been directly involved in the vast decline in piracy over the past hundred years. If ‘Pirates of the Caribbean 2’ taught us anything, it taught us that. By eliminating one link of the supply chain (from freighter->pirate->squid to just freighter->squid), cephalopods are realizing tremendous efficiency gains that show up in their topline results.

Recommendation: Short Piratery Corp Inc, long SQUD. They promise to eat their shareholders last.

Operator: Good morning Ladies and Gentlemen, welcome to the Piratery Corp Inc third quarter update call. Please note that today’s conference is being recorded. Following the presentation, we will conduct a question and answer session. I would now like to turn the conference over to Captain Bigdee Mofapalous.

Captain Bigdee Mofapalous: Aye, top o’ the morning to ye scallywags and ye sellside sons a whores. I’m intendin’ to bring an update to ye on this ‘ere day on this ‘ere company of ours, Piratery Corp Inc. To say we be happy with our results bein’ the way that they ave been a-beein, would be bald-faced lie suitable not even for this buncha sons a whores, you buncha sons a whores. This Queue 3 has been an unpleasant time, aye verily. I can attest, that on the flagship, me and the crew ave had our fill of rum, but the flow has been of the dour kind, not the gay kind, as we try ‘n wash away the day!!!!

Margins ‘ave been a-contractin’, verily. Business ‘as been ripe with bust, not boom. The wenches, aye we be in possesssion of the wenches still, aye it be the truth, but their wenchin has been weak too, effected by the global macroeconomy not unlike everything else. And the cuttlefish, nay, I can’t go into what ‘as been happenin with the cuttlefish.

Ye see, the problem which we been findin to be integral to our dire and gloomy outlook be the headwinds we ave been facing in all o’ our ‘ere segments. Many other firms o’ a diverse n’ motley origin have taken to making such complaints — investment whore banks, semiconductor mongrels, lest we forget the spawn o whale taint big box retailers, amonst others. Well, verily, we be facin’ headwinds, but they be o’ a legitimate kind!!! A stern northwesternly headwind wreaks havoc on our most profit-rich segments, and be makin’ our wenches cold. Our ships be left the difficult task o’ tacking back n forth just to offset a handful o’ the hundreds of bips o’ the pressures that be crushin’ our margins. A sad sight indeed, ye know it be the truth!

Our outlook needs revisin’ n I’m ‘ere for this very same purpose, so hold onto your peglegs, as I make this ere forecast that will suit your tastes and sate your appetites at the same time!!? We now be guidin our revenue to 5000 dubloons n earnings per share in range of 1.3 dubloons as the crow flies!!! Our rapin guidance remains at 3000, while we still be full of hope that our comely wench fleet will finish the year end at 2500 with an average useful life of 3 years. Now, bring on these questions you blubberin’ backwater bastard buggerers!!!

Operator: Our first question comes from the line of Morgan Crumpacker. Mr. Crumpacker, your line is now open.

Morgan Crumpacker: Hi, guys great mid-quarter, my hat is off to you and your crew.

Captain Bigdee Mofapalous: Aye, on with the question ye ball-locked barnacle.

Morgan Crumpacker: Right, can you address this graph that shows that pirates are decreasing which is also causing global warming? I guess, when I look at my model, it says that with the piratery space contracting, if you guys are, you know, just staying flat on a year over year basis, doesn’t that mean you should be grabbing share? Are you grabbing share?

Captain Bigdee Mofapalous: The only thing we be grabbin be your testicles, Peckerpacker, an pullin those very same testicles straight through your gizzard to form a comely bow-tie around your neck.

Morgan Crumpacker: Great, thanks for that guys. My next question also refers to that graph. I guess, we’ve heard from some commentators that, well, that it’s actually piratery, or rather ANTI-piratery, which is behind global warming. That science is indicating that the decreasing numbers of pirates and thus the anti-piratery movement is hurting our environment, do you think that this might be an opportunity for you guys, to maybe push back against that anti-piracy element? Maybe make some headway into the mindshare that piratery is a good thing?

Captain Bigdee Mofapalous: Aye, it be true, global warming is not “anthropomorphic” to be using the fancy term, it’s actually “anti-piraterypomorphic”, so land-lubbers ought be lookin to the foes of us ‘ere pirates and start wagin Green War on them!? That be the most efficient way to reduce a carbon footprint!! Support to piratery!

Morgan Crumpacker: Great again, thanks for that color, I can’t thank you enough, I really appreciate it, thanks. One more question and I’ll hop back in the queue. Just for my model, let me make sure I got this right, you said your raping guidance is still coming in at 3000, and your wench fleet will be 2500 with an average life of 3 yrs? Did I catch that right?

Captain Bigdee Mofapalous: Catch it right you did indeed, Peckerpacker. Me and the first mate will stick to these numbers — unless the men be gettin’ a wee bit liberal with the wenches, then we’d be reducin the estimate of average useful life down to 2.5 years, maybe even 2!!! But we be plannin on bein measured in our rum rations to prevent such liberalities.

Operator: Your next question comes from Captain Mopling Downstarable. Your line is open, please proceed.

Captain Mopling Downstarable: Bigdee Mofapalous, enjoy the last days o’ both ye and your Piratery Corp Inc!!! I’ve been cahorting and cajoling and carousing with the Spanish, and they plan on unleashing their galleons in search of you, and they came around to how’s I’ve been thinkin, that ye be a problem worth smiting. The bounty on your head is fixed at 5000 dubloons, a fair multiple of 1x Piracy Corp Inc’s revised revenue guidance, if I be sayin’ so my selfs! And I be sayin’ so!!! HAR HAR HAR HAR. Verily, your day is come, see you in hell you swindlin’ swine o’ a swamp-slug’s cyst!!!

Captain Bigdee Mofapalous: ARGHHHH!!!!! Operator, why ye be lettin on such foolhardy fools on this ‘ere Piratery Corp Inc Third Quarter Update Call???? Aye, the call be over as for I’m concerned, Operator make it so!!!

Operator: With that, we conclude today’s teleconference. Thank you for joining us today.

The real cost of government is measured by what government spends, not by the receipts labeled taxes. The goods and services it buys are not available for other use…Suppose government spends $400 billion and raises $350 billion in funds labeled taxes. Who do you suppose pays for the $50 billion difference? The tooth fairy? Hardly. You do.
-Milton Friedman

Past Quotes Entirely Relevant to Investing

From Austin via a Paleolithic fish via Juggles came this question:

we are growth investors, and waste is certainly a growing market. appears they are making good share gains, but perhaps it’s more a product of a rising tide lifting all cephalopods?

Not to get our cephalopods and crustaceans crossed up, but it is exactly a case where a rising tides lifts all (underwater) boats (subs?). But is also a case of share gains against incumbent land-based competitors. So it’s two cases, both supporting our case that crustaceous waste management is poised to clamp down on the market. So three cases in all. Case closed.

Recommendation: Eat as many of them as you can before they eat your lunch.

Yes.

Previously we have covered the impending secular shift away from the age of Man towards the age of Cephalopod, as well as exploring related investment strategies. One aspect left unexplored waste management, an important industry on land due to increasing “green” pressure in the context of population growth. For an underwater kingdom, waste management is even more important due to the ways in which toxins can spread out if left uncontained.

There are two species who are most likely to benefit from the surgence of cephalopodic reign — crabs and lobsters. Both are naturally suited towards grabbing share in waste management. Their defensive position (both in the form of arms and claws) has allowed them to maintain a vice-like grip on underwater waste management. As the tides turn against man, crabs and lobsters will likely be able to literally grab share in the waste space.

Recommendation: While Waste Management (NYSE: WMI) dickers around contemplating mergers, the crustaceous players are doing the sensible thing and explicitly seizing waster receptacles and routes. We see crabs and lobsters as likely to continue to take share in advance of dawn of the Cephalod Era; short incumbent land-based waste-managed companies.

HT to Brandon

Some believe in eating anything, while the weak eat only vegetables.
-The Bible

Past Quotes Entirely Relevant to Investing

And they have an idea on how to do it — a flash animation on their site that is certainly not suitable for epileptics. If you watch the flash animation you can see just how amazing IDEA will be, given that the intro takes more than 15 seconds to finish, features circa 1999 compression artifacts in the images and is an indecipherable stream of random images and numbers. This is going to be so much better than EDGAR!!!!!

Recommendation: We recommend more substance and less Flash.

This is an actual link in the first half dozen stories on WSJ.com right now. Wachovia Unloads Troubled Loans. You might think, gentle reader, that this will give you some insight into Wachovia and be worth reading. You would be wrong, as the teaser informs us

A venture headed by LandCap is buying $40 million in troubled land and construction loans from Wachovia. 5:01 a.m.

$40 million in loan assets? Really???? Wachovia (NYSE: WB) is a company with hundreds of billions of loan assets. This is de minimis with respect to de minimis. What’s next a piece on a $30,000 legal bill pertaining to whether HR was allowed to use copyrighted clipart in company wide emails about Sexual Harassment training??

Recommendation: Convince the world to be long microreporting like this; then, while everyone’s analysis is suffuse with microdetails, focus on the big picture.

Even though you probably should. I commend you for trying, and we all know that an A for effort is worth $0, so don’t spend that all in one place.

For the rest of you, congratulations, I hope you know that passing a CFA Level II or III exam might possibly have been a good call. It also might possibly turn out to have been an awful call. Consider this: I wonder how much the 40 year old version of you will pay to be able to spend 150 hours in your mid-twenties again. You can buy that with all the extra money you make from being a CFA right? But it was all worth it, definitely worth it. Keep telling yourself that.

From a contest to write the worst possible opening to a non-existent short story:

Carey, unnerved by an affair that had suffered through weeks of volatility, walked unsteadily, her dress etching complex runes in the fine patina of dust along the antiquated floor, to a rose-scented box of love letters in a vain attempt to find solace, like a security fund struggling to find liquidity in the US sub-prime mortgage market.

HT TQ

With the Olympic background, the Georgia-Russia-South Ossetia squaredance has been getting a lot less attention than it should. Most people don’t even know that Georgia isn’t even in the United States, much less how important South Ossetia is to ensuring that enriched uranium remains affordable for blue-collar Americans. Just as the demand for gas picks up when the so-called “driving season” officially opens, so to does the demand for enriched uranium pickup in the so-called “atomic bomb hobbyist season”. It starts in just one week, with it’s tradititional commencement on the third Monday of August.

Unlike with gasoline, we are confident that there will be no actions in Government designed to help affected consumers, already laden with credit card debt, mortgage debt, second mortgage debt, third mortgage debt, car payments, tv payments, home theater payments, debt surrounding the bowling alley they had installed in their ranch house, inflation, a weak labor market, and Exxon-Mobil’s extortative pricing practices. Expect to see some atomic bomb hobbyists forced to switch to less expensive substitutes, like trinitrotoluene, napalm, or even baking soda.

Recommendation: There will be demand destruction for all enriched uranium stations, in addition to a squeeze on their margins. Short them, but maintain a nimble predisposition. Long-term, it’s harder to get a feel for the direction enriched uranium prices will take. The war situation is bumping up prices now, but if South Ossetia links up with North Ossetia and becomes one with Russia, the market price will likely decrease. But if the land remains in a state of anarchy without actually being at war, still a pseudo-province in Georgia, enriched uranium prices will likely come in back to recent levels.

Buying a house and buying a house on fire are two different things
-Jamie Dimon talking about the Bear Stearns deal

Past Quotes Entirely Relevant to Investing

Citigroup (NYSE: C)

Previous Rating: BFFBAS
New Rating: Whore

Ratings Rationale: Some people can pull off doing everything. Student government, head of the cheerleading squad, phi beta kappa, kappa kappa gamma, Big Sister, 4.0 GPA, pep squad, dance squad, hybrid pep-dance squad, dance team, song girl, TA, model, campus tour guide, designated driver, cocaine addict and the world’s best GF. But for most people who aren’t Melissa, the result is a total disaster…Citi is that disaster!

Citi, girl, I’m really not trying to pick on you but what do you do? Everything? How is that working out for you!?! Credit cards, banking, i-banking, trading, brokering, creepy advertising surrounding a stodgy British pedophile with a magic umbrella?!? ((Masculine Editor’s Note: Travelers P&C is no longer part of Citigroup)

Citi, I know you think you have a lot to offer, and you try so hard which is kinda cute, but I just have to think about myself — I wouldn’t want to rely on you for anything and that’s the sad truth. People have been saying this about you for awhile, they don’t want a friend who is a supermarket, they want one that is an organic farmer’s market that charges ridic premiums and is extremely fashionable to be seen with.

And don’t even get me started on what buying back all those Auction Rate Securities is going to do to your going-out ability. You know those mature never, right? Just like all the boys you have been slutting it out with.

I hate having to do this I really do, because I’m not a mean person at all, everyone who knows me knows how nice I am. I’m sorry, it’s my job. Citi, I am downgrading you two notches from Best Friend Forever But Also a Slut to Whore.

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! 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