Long or Short Capital

Wellbutrin is an antidepressant prescribed to people who are depressed. Normal run-of-the mill stuff. But Wellbutrin is also a source of endless amusement for the pharmaceutical engineers who created it. These guys went way long humor. Most drugs have side effects such as nausea, loss of appetite, loss of sexual appetite, etc, but it’s a trade-off that is usually worth it. Wellbutrin’s side effects are…that it can cause anxiety and panic attacks. PANIC ATTACKS.

The production meeting must have gone something like this:

Pharma 1: God, work is so stressful here sometimes. We develop great ideas and then we have to subject to a time-extensive testing, FDA regulatory approval, my god, I can’t take it anymore.
Pharma 2: Sounds like you need to blow off some steam good buddy.
Pharma 1: But how?
Pharma 2: Me and the boys, the other pharmaceutical engineers, every once in awhile we have ourselves a little bit of fun. We use spectroanalysis, chromatographic distillation and other processes to create a drug that cures a condition, say hair loss, for most people. I stress the most people because in a certain random group of people, the drug actually serves to aggressively exacerbate the condition, in this case by causing the complete death of all the hair follicles on the body. It’s like roulette with people, just spin the pill and see where it lands.
Pharma 1: What about a drug that can soften depression, but in a certain subset of people will spur an increase in anxiety and a higher likelihood of panic attacks?
Pharma 2: Now you’re thinking like a pharmaceutical engineer!
*Pharmaceutical Engineer high-five (like a normal high-five, but more awkward, and while wearing funny suits)*

Recommendation: Long practical jokes, especially when they are in the form of an anti-depression pill. Short people who can’t appreciate jokes and/or who are crazy.

In this time of financial uncertainty, we have experienced heretofore unseen volatility in our portfolio. Assets that were previously uncorrelated are now correlated, assets that were previously correlated are now uncorrelated, write-downs are good, the recession either didn’t happen or is already over, LIBOR is possibly a figment of a banker’s imagination and it’s always the best time to buy. As such, management has decided to allocate a significant amount of our cash on the balance sheet into a fixed income product that shows no correlation with any of our current holdings and is not in any way sensitive to interest rates.

Our new favorite fixed income product is barry bonds. We have invested a meaningful amount of our cash into this asset and the maturity is one year. The yield is 0% on a cash basis, but approximately 25% based on our performance enhancing risk model.

We think barry bonds will help dampen the volatility we have seen in our portfolio as the only thing they correlate with is steroids, perjury and racism. In turn, this should allow our subscriberholders to benefit from more stable returns. Yet again, we say, “You’re welcome.” We considered a pair trade with a short of roger clemens so that we could effectively short the racism spread, but that trade looks to continue to be volatile.

Inspired by this incredible expose about oil prices hurting kids via increasing operating costs of school buses all over the country, we decided to survey other demographic representatives to see how higher oil is affecting them.

Middle-aged white woman in the midwest: “Gas prices are so crazy I had to buy a second car, one for when gas is cheap and one for when gas is expensive. But sometimes I drive the wrong one just to be bad, I’m a naughty girl on the inside, I go wild!”

A London debutante: “12 months ago it was so posh to be shagging a banker, but now I can’t be bothered if he doesn’t come from oil money. Russians, Iranians, MAYBE a Norwegian – but only if he has that Viking look. Also unrefined crude oil makes for great lube – it’s so hot when they put it on you, and the fact that it’s getting more expensive and they still just keep using a lot of it- that only makes it hotter and shows they care about you.”

A common dragon on the street: *FIRE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!*

A baby: “You would be alarmed at the rate of inflation I’m seeing in breast milk. Most people wouldn’t believe it but the persistently rising crude oil price has a direct impact on mommy juice. I estimate 2% of the input costs for breast milk are oil and oil related products. How do you think mommy makes milk? She gets in her car, goes to Olive Garden and eats pasta, you can’t walk to Olive Garden, you can’t crawl either — I know, because I tried. Shit’s like an ultramarathon of crawling, and with my job, my kids and the commute, I don’t have the baby-time to be in that kind of baby-shape.”

That oil-eating bacteria (which may or may not exist): “I don’t think you understand how hungry I am and what it takes to feed a family of four oil-eating bacteria. I’ve lost thousands of micrograms and my entire asexual family, also known as me and those who are indentical to me on a cellular level, we are all doing horribly. But boy does Gail (who is also me (this is getting meta-creepy)) look fabulous in her skimpy bacteria-lingerie! The government always says it will stand up for the little guy, but apparently this little guy is too little. Vote Obamoeba!”

Please tell us how oil is changing your life.

Anytime is the best time to buy.
-Kieran Quinn, chairman of the Mortgage Bankers Association

Past Quotes Entirely Relevant to Investing

The whole point of being an entourager is a display of power, wealth and ultimately, desirability for procreation. The whole point of being an entouragee is to ogle women and not have to take care of yourself. Thus it concerned us when we read this WSJ piece on the economics of entourages:

Underperforming security guards, personal assistants and coordinators can be fired for offenses like ogling women or falling out of shape. “It’s no different than working for Xerox,” Mr. Ellerbe says.

If you are no longer getting to benefit from the whole point of doing something, is that a long-term viable enterprise?

Recommendation: While there are certainly attractive elements about entourages, especially when modeling the models and female groupies, we are concerned about the burgeoning business model drift. As entourages move the experiences of their core entouragees from that of “ogling women” to that of “working at Xerox” we think there is a significant risk that the entire premise will face significant diminution. That some firms, such as Thomas Howard, are already being forced into outsourcing is another red flag. When we have done sufficient modeling of the models with the help of our own entourage, the Doo-Dilly Gents, we will issue appropriate guidance.

People are concerned about an end of existence event that may be caused by the Large Hadron Collider and there is talk when the LHC is turned on in July 2008, that a super-collision here, a super-collision there and *bam*, no more Universe. This would doubtless be an event from which most investors have not adequately protected their portfolios. That is why Long or Short is now offering LHC End of the Universe Puts. It’s a simple put option wherein the buyer retains the write to sell the Universe at a strike price of “Existing”. Based on our Black-Holes model used to value all “end of the world” options, the July 2008 vintage options are currently priced at $20.

Link to purchase

Recommendation: These options are literally the only way to protect your portfolio from the possibility that when the LHC is turned on mini-blackholes will form, come together and have a blackhole party that literally rips the (cheap) fabric of universe asunder.

Don’t let this

Turn your portfolio into this

Politicians are generally great at what they do. We know that. It’s a group that self-selects for blowhards and megalomaniacs with a thorough understanding of Zimbabwenomics. And certainly, Massachusetts politicians typify these tendencies. But even by the Mugabian standards of politics, things are getting out of control (in a good way).

[Barney] Frank’s idea is that, for mortgages originated between the start of 2005 and mid-2007, a lender and borrower would be able to agree on a federal refinancing plan. Lenders would have to write down their loan to no more than 85% of the current appraised value of the property – which means the banks will use this opportunity to unload the biggest stinkers in their loan portfolios.

For the borrower, the deal is even sweeter: a low fixed monthly payment and a reduction in the principal to market value. The Federal Housing Administration would then guarantee the loan, up to a total of $300 billion in total Frank Refis. The deal is so sweet that even Mr. Frank is concerned that otherwise reliable borrowers may “purposely default” to be eligible for assistance.

Just to be clear, what Mr. Frank is proposing is to bail out anyone who took risk on a house they couldn’t afford. Many of these people will have, smartly, put little to no money down to take that risk and benefit from the potential upside were the house to appreciate. How is he planning to finance this proposal? Taxes, of course. So those who dumbly did not take risks with large potential upside will now pay those who did. This is an extremely Mugabe efficient proposal and will be a resounding success with no downside.

Recommendation: Long excessive risk-taking, just make sure to do it in a group large enough to form a voting bloc. Also, I have found that Zimbabwenomics is much funnier when it is not happening in my country.

I don’t get him, his relevance or why he continues to amuse people. But Tim Sykes certainly exists. I know this because he emailed me.

Hey there, how are you? I’m blogging like a madman and loving every second of it! I’m putting together a huge list of money/finance/trading/investing blogs/websites to be called ‘TIMlinks’ so I wanted you to join. It’s free and once I start promoting this baby, you should get dozens or even hundreds of daily visitors to your site—kinda like FeedTheBull, Entrecard or Blogrush, but for our target audience only Check it out:

http://timothysykes.com/timlinks/index.php

After your join, to get ranked, you’ll be emailed code for a ‘TIMlinks’ badge, just add it anywhere on your site and you’ll be set!
– – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – –
Timothy Sykes | Author of An American Hedge Fund
T 407.xxx.xxxx| F 407.xxx.xxxx | www.timothysykes.com

It’s telling that his system is identical to every splog and SEO-only oriented link trading request we get. They link you from their non-main page, you link them from your main page. A great deal! We should get hundreds of links a day from a separate links page buried within a mediocre site! Seems probable.

We don’t do reciprocal link trading or such things. If it’s a site we read and if it’s one we think deserves to be linked, we link it. Feel free to do the same but we won’t be adding a badge or trading links.

Regardingly,
Mr. Juggles
longorshortcapital.com

You will agree with me when I say that I tried to be polite.

Haha ok

His repsonse naturally raised the question to me “What was funny in that?” As a master of humor, normally these things make themselves aware to me. In this case, it did not. Naturally my reply was:

What was funny in that?

From Timmy:

u just sounded so serious, i’m just trying to help increase the popularity of the sites i like by giving them this badge of honor

More like a scarlet letter.

A badge of honor, Tim? Really? We take everything we do very seriously, that’s one of the reasons we do it better than anyone else. Maybe you should start practicing your seriousness and take your site to the next level. Again, you are free to link to us and we encourage you to do so — it is likely to your readers benefit. We won’t link to you until you have created a site worth reading, one that we also happen to read.

I expected more laughing and something non-intelligent from his next reply. I was not disappointed.

LOL, being serious and the best is the exact opposite of what I’m going for, all I wanna do is teach and entertain, aka actually help people understand this stuff better! All you finance snobs forget 99% of the people out there have little to no education and thanks to the ridiculous importance you place on always being the best, people believe mistakes are just about the worst thing you can do. Wrong! I like some of your articles, but take it down a notch, you’ll live a happier and more fulfilling life!

My reply:

Teaching and especially entertaining are both things which benefit from being taken seriously. No one learns anything from someone who is taking a half-ass dimwit approach to teaching. Worse, no one is entertained or is made to laugh by people taking a half-ass dimwit approach to humor.

Mistakes are ok, but mistakes that should have been avoided but weren’t because of sloth or lack of diligence are horrible and should be treated as such. They are entirely avoidable by people who take things seriously. Life is a very serious thing. We are all dying. Asset management is even more serious than life.

Regardingly,
Mr. Juggles
longorshortcapital.com

Timmy’s reply:

Solid reply but you forget that the vast majority of people out there are lazy and dim-witted. For them, the very thought of long complex calculations and ramblings from boring finance people is equatable to prison. What do we do, ignore those people and laugh at how much better we are?

No, I believe those people can and should learn about the stock market and since Penny Stocks are pretty simple things to understand, it’s a great intro. And, I can help them avoid the mistakes I’ve made, lessons I was forced to learn alone because there was nobody in the entire snobby/stuck up world of finance who ever detailed their stupidity for all to learn from. Again, stupidity/mistakes–nothing to be ashamed of, we all make stupid mistakes at one time or another, the key is learning from them and sharing them right alongside our greatest victories. Welcome to my business model: brutal honesty. It’s sad that this is revolutionary, but thanks to the kind of people in this industry, there’s a massive window of opportunity. Thanks again!

Recommendation: Timmy is a blackhole. A blackhole of knowledge, understanding, financial acumen, reason, emails and time. If you have not yet crossed the event horizon of Timmy, keep back. At best, he is played out. At worst, you will lose brain matter as it is stretched to infinity, taken to the speed of light and crunched into a superdense nothingness.

Blessed are the young, for they shall inherit the national debt.
-Herbert Hoover

Heston Addendum:
Get your stinking paws off me, you damned dirty ape!
-Charlton Heston in Planet of the Apes

Past Quotes Entirely Relevant to Investing

I’m calling the top on the bottom. So many people have been calling the bottom. For instance, today non-farm payrolls were down 80k and unemployment jumped to 5.1% (both are clearly trending negatively) and yet the market is rallying (S&P500 up 11pts, Nasdaq up 26pts). This must mark the bottom!
Other bottom-marking rallies:

• Bear Stearns bankruptcy rally
• UBS $19bn writedown rally
• Fed liquidity injection rally (several)
• Doug Kass, Bear turning Bull rally
• Sovereign fund injecting enough capital to achieve solvency rally (several)
• Commodity bubble bursting rally

That’s a lot of rallies based on various factors that certainly, definitely, surely mark the bottom. Unless they don’t. Which they don’t.

Recommendation: Short the bottom. Go long the top.

From a tweet I put out immediately when the jobs report was released this morning:

Rally time! The new paradigm is not bad news = good news, it’s everything bad has already happened, only good stuff ahead!

Recommendation: Nothing on Heaven, Hell nor Earth can or will make the S&P 500 go down. It has been immunized against negativity.

They’re here.

A mysterious sea creature up to 7 feet long, with 10 arms, a sharp beak and a ravenous appetite, has invaded ocean waters off Northern California. Packs of fierce Humboldt Squid attack nearly everything they see, from fish to scuba divers. Marine biologists are working to discover why they’ve headed north from their traditional homes off South America.

It’s pretty clear why they are moving north — world domination. Marine Biologists should pull their heads out of their scuba asses and start looking at the underwater financial markets to find out what really is going on.

Recommendation: A mere scouting party, and yet look at the havoc it wreaks. The humboldt squid can get up to 2 meters long. Now consider the fact that the collossal squid can get up to 10 times that size and you start to understand what humankind is facing. As man is on the way out, you might as well continue to profit from it — we maintain our long stance on the entire Cephalopod Index. Also our research indicates that the underlying squid and octopus firms will likely be able to pass on any cost inflation they experience in legs or razor beaks by effecting price increases in their world domination product.

HT to E-roc

Science: How Octopuses get some Octopussy

Lots of potential investors have been inquiring about our take on the Zimbabwean elections which occurred over the weekend and indicate that Mugabe and his party, ZANU-PF, have lost the election to control the breadbasket of Africa, Zimbabwe. Some people seem to think that this means that it is al over for Mugabe and his reign of economic progressiveness with his policy of Zimbabwenomics. Some people seem like they need to get more familiar with Zimbabwenomics and its underlying principles.

• Fact: On a nominal vote basis ZANU-PF lost the parliamentary elections.
  Reality: When you adjust the votes to account for the real rate of tyranny, you see that ZANU-PF won by a significant majority, a veritable tyrannical mandate
• Fact: The elections are over.
  Reality: When you again account for the real rate of tyranny, you’ll see that the elections not only are not over, but they may not have actually taken place to begin with. Reality exists, but only so long as Mugabe permits it.

Recommendation: If Mugabe is living, he is ruling, and since Mugabe recently decided to enact legislation that legally ensures that Mugabe will live forever, Mugabe will in fact live forever. Zimbabwenomics forever.

Facts admitted to in the last 24 hours:

• UBS (NYSE: UBS) needs to raise $15 billion in capital
• UBS wrote down $19 billion
• UBS chairman is leaving
• Deutsche Bank (NYSE: DB) admits they are lying bastards by only writing down $4 billion
• Lehman (NYSE: LEH) is trying to raise $3 to 4 billion in capital

Market reaction pre-opening from the WSJ.com:

Stock futures extended gains as investors opened the books on a new quarter by betting that the latest write-downs from UBS and Deutsche Bank have put most of the worst damage to banks and brokers from the credit crisis out in the open. 9:10 a.m.

Recommendation: Hey everybody, April Fool’s!

Postscript: The Dow Rallied 391 points on the day, no joke