Archive for March, 2009

The GMS Defiance

Mr. Wagoner was greeted with a standing ovation, according to people at the meeting. Employees said they were proud of Mr. Wagoner for defying calls for resignation and insisting the company would not file for bankruptcy protection. Yet at the same time, his resignation Sunday in exchange for financing needed to save the auto maker was characteristic of his devotion to the company he’d joined after graduating from Harvard Business School in 1977.

I find it difficult to reconcile the above with the below.

I hate to be objective and even somewhat supportive of what I see as frightening interventionalism by the Government, but Wagoner simply did not get the job done and has created a large enough sample size of performance for this to be clear. He, like Walter Noel, may have been a great guy, a veritable Jimmy Stewart reborn or Jesus back on Earth, but at his job as CEO of GM he failed and that is the way in which he matters. Not only that, but if you were to overlay a graph of his personal net worth over that chart of GM’s stock price, I bet they would demonstrate a negative correlation. And he should have some humility given that he was ever even named CEO because of how he was named at birth — namism at its worst.

Recommendation: I like defiance, and not just as the name of a battleship. I like the principle of not giving in, of fighting until you die, of righting the unrightable wrong, of marching into Hell for a heavenly cause. But let’s save the celebration for meritorious defiance, like General Anthony McAuliffe or Winston Churchill, as opposed to pridefully clinging to your job or refusing to file a company who could benefit from it.

Quotes Entirely Relevant to Investing 03-29-2009

When Lenin was little, all the birds in the forest were singing
“Man, this is it!”
But now that he’s older, all the sailors in the heaven are singin
“Abandon Ship”

Daddy, Daddy, please spare the world from the government
Daddy, Daddy, please spare my soul from my own judgment
Daddy, Daddy, please send me a heart that isn’t made of cement
’cause the money’s all been spent
the money’s all been spent
the money’s all been spent
the money’s all been spent

-Arcade Fire in the song “Lenin”

Past Quotes Entirely Relevant to Investing

Sell Out Saturday: Wall Street Survivor Will Not Poison You In Our Experience

This is a sponsored post

Times are tough. If you walk out onto Wall Street these days, it looks worse out there than Oklahoma did during the Depression. Things have gotten so bad that Steinbeck plans to write The Rapes of Math, a sequel to his most famous novel, this time based on the experiences of those in finance. He plans to write this from his grave, after Alvarez & Marsal recapitalize him, restructure his operations and generally work him out. Some people call them vultures; I like to think of them as mad scientists who bill $600 an hour or $200,000 per month to reanimate corpses.

At Long or Short Capital, we have been proactive in our response to the Great Regression. We embezzled as much money as we could before the invisible hand hit the fan, so to speak. Then we stopped our dividend to ensure that we could build an adequate capital cushion to weather this storm. More recently, we have retained counsel to make sure we had adequate cash flowing out of our operation and to cover us from litigation from irate subscriberholders. Now, we bring you this sell-out saturday about this wonderful site called Wall Street Survivor because we really really need the money.

You may ask — how does this site work? Why does it exist? Specifically, how does it help someone survive Wall Street?

I would answer: I don’t know, I don’t know, and by not having you invest fantasy money into fake stocks, respectively. In fact, if you were to have invested your portfolio solely in a portfolio at Wall Street Survivor, you would have outperformed every single major index in 2008 and YTD. There has not been a better time to invest in a fantasy portfolio than the last 18 months and I say that despite the fact I am being paid to write this. I also say it because I am being paid to write this. But Wall Street Survivor has never lost me a dollar, which is something you can build on. Also, as indicated in the post title, I have not been poisoned by their site which is to their credit as well.

On Extortion and/or On Retaining Legal Counsel

It has become apparent to us that in this period of economic catastrophe that there will be an increase in rent-seeking generally, and legal wrangling, specifically. To ensure that we are adequately protected from/by the legal mafia, we have retained our own made esquire, Pleb.

Based on his first memo, two things are clear to us:

  1. He is clearly under impression that he is being paid by the word.
  2. Long or Short’s executive team and its legal counsel will be in a race against one another to suck all of the cash from the firm’s coffers, while there still remains cash in the coffers to be sucked.

Recommendation: Legal counsel is a market which is clearly not Mugabe Optimal. We think the former lawyers who populate congress should do the right thing and make the supply more affordable for the demand.

Did You Get That Legal Memo I Sent You?

Background: As retained counsel for Long or Short Capital, I am occasionally called upon to render illegal opinions regarding current developments. Yesterday my opinion was asked on the House bill which would tax at a 90% rate the bonuses received by those making over $250,000 at companies receiving over $5 billion in TARP funds, including those firms which did not opt to take TARP funds but which were forced to. Specifically, you asked whether this might retroactively abrogate your pathetic mini-baller bonus for FY’08, or at least that’s how I interpreted your questions about whether “Contracts are valid anymore, specifically contracts in situations which have involved gross negligience (e.g. we put all our money in Bear Stearns after listening to Jim Cramer or blew our investors moneys on a series of extravagant lemon parties)”. Specifically you asked (1) whether it was fair; and, (2) whether the law prohibited this.

Brief Answer: Ha ha ha ha ha. You *kill* me. I’m waiting for you to recommend the prime rib, Shecky. Ever since the New Deal-era Supreme Court translated the Commerce Clause into English as “we can do what we want and you can’t stop us,” Congress has been able to take as much of your money as they want, at any time and for any reason. It’s a testament to their monumental stupidity that it took them nearly 80 years to figure this out. Unfortunately for you, they did.

Analysis: First, the law doesn’t recognize the concept of “fairness.” It only recognizes people with highly paid attorneys, who went to the right law school and who are licensed members of an court-sanction conspiracy to restrain trade, aka a “state bar.” Even then it only recognizes us grudgingly, one at a time, and it helps if we frequently lose a lot of money to the law playing match golf. The law “recognizes” fairness in the same way you “recognize” that girl from Ops that you hooked up with in a utility room after the Christmas Party last year – if it sees fairness coming, it will duck into the men’s room until after fairness has gone back to whatever dingy little office (cage?) the managing partner normally keeps it in.

Second, although the Constitution nominally prohibits Congress from singling out a class of people and taking all their money and holding them up to ridicule, you are not classed as “people” under the constitution. Ironically enough, under both the Marxian Critical Legal Theory and the Chicago School Theory of Law and Economics, those who make money rather than just standing there waving around a tin cup are considered “economic production units.” So you don’t really count as people in the traditional sense, except when it is time to figure out how many place settings will be needed at political fundraising dinners. Unlike former slaves (freed by the 13th Amendment), women (enfranchised by the 19th Amendment), drunks (allowed to drink by the 21st Amendment), and the predominantly white male property owners who were formerly protected by the rest of the Constitution, you my dear friend have been liberated from the duties of citizenship, and it seemed only fair to liberate you from the privileges too. Thus, to the extent you “enjoy” Constitutional protection, it involves lying back and enjoying it while Congress has its way with you. Don’t sweat it; my friend Sabina tells me that this is how Rome was born, so whatever transitory pain you may bear is probably justified by the greater good.

The problem here is not the punitive tax policy that concerns you, but the fact that you do not appreciate the religious and miraculous tenor of our times. Just recently, a law that would have protected your bonus was birthed within the stimulus bill without anybody in Congress having written, read, or voted for it. It was signed by the President without his knowing about it, and enforced by Treasury without their awareness. Indeed, it was the Miraculous Conception. Then it disappeared Friday, we are told, ascended into Heaven there to sit at the right hand of Adam Smith, raised [Ed: sic. razed] by the hand of the mighty archangel, “Will of the People.” Not much is known about Archangel Will, except that he does not like you very much.

I warned you about all of this this in a memorandum prior to the last election. A crack legal team working at my firm determined that the current president is the direct descendent of Lion-O, Jesus, Karl Marx and a unicorn of some reknown. The Members of Congress, on the other hand, were found to have descended from the unholy mating of a Know-Nothing anti-Irish lynch mob, William Jennings Bryan and the ghoulies from the movie The Ghoulies. I recommended at the time that you “go long” shotguns and dehydrated food, and “go short” reservations for the Hamptons. I also advised that you should put a stop check on the payment for your listings in The Social Register and Who’s Who Among Financial Advisors. But did you listen? No. The way you ignore my advice makes me feel like your mother, except for the fact that I get nearly three times as much per hour as she does.

Regardless of your fiscal incontinence, a local teleprompter with whom I have good relations tells me that it is important for you to remit payment for my advice immediately. It would be a shame if anything were to happen to your bank account. Specifically, it would be a shame if the IRS were to find out you have one, and that there is money in it.

Your most humble servant,
Pleb, Esq.

Quotes Entirely Relevant to Investing 03-22-2009

That’s bad business. How long do you think I’d stay in operation if every time I pulled a job, it cost me money? If he’d just pay me what he’s spending to make me stop robbin’ him, I’d stop robbin’ him.
-Butch Cassidy (HT Austin)

Past Quotes Entirely Relevant to Investing

AIG Meet Zimbabwenomics

People mistakenly assume that Zimbabwenomics is just about Mugabe Efficiency Theory and making supply cheap enough for demand to afford it, thus creating a Mugabe Optimal state. But the field has a lot more to offer whether it be by finding ways to make everyone a millionaire or to win elections you actually lost. Now that the mantle of Zimbabwenomic leadership resides in the US, we are seeing new applications of classic theories as the recent Affaire D’AIG (NYSE: AIG) demonstrated.

When the US was busy trying to rush the passing of a $700bn “stimulus” bill along party lines while selling to the public the fact that the world would end if it wasn’t passed, many wondered how the largest piece of non-budget Government spending in history could go through in a few days with little to no scrutiny. It was unpatriotic to question it or to ask for a time-out, which is exactly what I told my wife when I left work to buy our second mega-yacht (now repossessed) a few years ago.

The solution that the US executive and legislative branches discovered was on a page straight out of Mugabe’s Zimbabwenomic Text Book — fan the flames of populist rage against a rich minority target. Even better, a rich minority target who has nothing to do with the proposed legislation and, at best, represent an infinitesimal fraction of the greater concern. Facing (erroneous) allegations that his vision for Zimbabwe wasn’t working, Mugabe adopted a program of land reform and property reform which pushed out wealthy white farmers and south Asian businessmen. Zimbabewe grew its productivity by alienating (often physically) the rich elite, while its Government continued doing what it had been doing so well, as can be seen in Exhibit A.

Exhibit A: Zimbabwe before land reform and after

In the US, the Government has fanned the flames of populist rage towards $160 million given to certain AIG executives under the terms of their contracts (which we are not privy to and thus cannot ascertain the validity of). At the same time, the stimulus bill calls for the spending of $600 million every day for the next 3 years and has received much less scrutiny, despite the fact that it is historically the single most massive transfer of wealth from the future into the current. Pure genius and we only hope the result to the productivity in the US will be as great as in Zimbabwe.

Recommendation: All things in proportion.

The next target of excessive compensation focus should be congress whose members have each made millions over the last four years, while being responsible for almost taking down the whole financial system. Out of greed and a lust for power, they recklessly misregulated industries and securities of which they had no understanding; the same politicians and officials who got us into this mess continue to take down salaries and overall compensation which is greater than 99% of the country. I’d like to see their contracts, I’d like to take a look at every legal way to stop the payments that are continually made to them by taxpayers, I’d like an excise tax of 95% levied against the salaries of senators and representatives to the extent those salaries exceed the minimum wage. If they had any pride or sense of responsibility, they would refuse their compensation or give it back.

Can Lohan Get US Long?

My advice is to take all the money that I blow on cocaine and blow exactly that amount on US EquitiesResearch by Straight Cash Homie appended to Long Chunky Chick Assets:

This research needs to be augmented with the Lindsey Lohan indicator. When she was a coked out whore doing Disney films and being filmed doing guys in her Disney trailer (or bathroom stall) the bull market was in full effect. Since she has allegedly gone to rehab and sworn off the blow (and the men) the market has grown almost as cold as her career.

I propose the only way to really make the economy take its first big stride forward to recovery is to nationalize her and allow bankers to use her as means to rebuild confidence. This would undoubtedly be a highly controversial step but saving our economy is more important than any supposed “moral hazard.” To satisfy the Bailout Stimulus (or B-S for short) conditions on the population at large benefiting from such an investment she can be “taken public” by resale to Club Jenna by Vivid for a huge profit generator in DVD sales and “Club” appearances. It will take a few years to spin her assets back out for public benefit, by that time the coke habit and confidence (along with closely related cousin: The Bull Market) are back full swing!

(note: the public, like bank equity holders, will in no way experience anywhere near the benefits of those in Finance. They will gladly way over pay for what they are actually getting and by that time her risk level will be WAY more “speculative” than an equity traunch of a CDO. We all know the ensuing bull market will cause the irrelevance of risk controls and due diligence so just remember to get her stamped with the AAA rating and it’s a done deal.)

Following on, he submitted the following by electronic correspondence:

Lohan, 22, went on a bender after a Beverly Hills court issued a $50,000
warrant for her arrest for a probation breach
. She partied at JACK NICHOLSON’s Hollywood home until 4.30am.

Given my prior posts regarding the correlation for Lohan debauchery to the market, partying with Jack Nicholson has to be a very encouraging sign.

Recommendation: While technical-focused traders are looking for evidence that the recent rally will be sustained, the Lohan indicator is pointing Very Long, an upgrade from Half Mast.. The Lohan indicator is still the red-headed stepchild of indicators, but we recommend hitting that bid.

Love Markets: Long Human Love; Short Robot Love

Researchers at Toshiba’s Akimu Robotic Research Institute were thrilled ten months ago when they successfully programmed Kenji, a third generation humanoid robot, to convincingly emulate certain human emotions. At the time, they even claimed that Kenji was capable of the robot equivalent of love. Now, however, they fear that his programming has taken an extreme turn for the worst.

Kenji was part of an experiment involving several robots loaded with custom software designed to let them react emotionally to external stimuli. After some limited environmental conditioning, Kenji first demonstrated love by bonding with a a stuffed doll in his enclosure, which he would embrace for hours at a time. He would then make simple, but insistent, inquiries about the doll if it were out of sight. Researchers attributed this behavior to his programmed qualities of devotion and empathy and called the experiment a success.

What they didn’t count on were the effects of several months of self-iteration within the complex machine-learning code which gave Kenji his initial tenderness. As of last week, Kenji’s love for the doll, and indeed anybody he sets his ‘eyes’ on, is so intense that Dr. Takahashi and his team now fear to show him to outsiders.

The trouble all started when a young female intern began to spend several hours each day with Kenji, testing his systems and loading new software routines. When it came time to leave one evening, however, Kenji refused to let her out of his lab enclosure and used his bulky mechanical body to block her exit and hug her repeatedly.

“Despite our initial enthusiasm, it has become clear that Kenji’s impulses and behavior are not entirely rational or genuine,” conceded Dr. Takahashi.

Ever since that incident, each time Kenji is re-activated, he instantaneously bonds with the first technician to meet his gaze and rushes to embrace them with his two 100kg hydraulic arms. It doesn’t help that Kenji uses only pre-recorded dog and cat noises to communicate and is able to vocalize his love through a 20 watt speaker in his chest.

Never trust a love robot bearing gifts

When it comes to love, so to speak, accept no substitutes, especially robotic ones. Anyone who has ever been in a relationship knows how dangerous love can be, and unlike most assets that are dangerous when alone, love’s risks can’t be mitigated (yet, we are researching the issue) by being securitized and thrown into structures with things like coverage tests and CCC baskets. Love certainly can’t be derisked by automation, as the Tale of Kenji demonstrates with the power of “two 100kg hyrdraulic arms”.

Recommendation: Long human love, short robot love, market weight digital love. The human love asset, like piranha, is a tricky species. But human love assets serve as a great countercyclical investment — they will be there when you need it most, when skies are gray and Skynet has taken over. Rumors of a secular decline in human love assets have been overstated, which is why we continue to find human love assets so attractive.

Some caveats when building a human love asset portfolio:

  1. When building a portfolio of human love assets, ensure that the human love assets are unaware of the existence of other human love assets which you own. If they do happen to find about other love assets, and they are ok with it, it is important to document this event with pictures and video, for research purposes.
  2. Make sure that human love assets are unaware of the fact that they are considered to be human love assets. It is important to remember their names and refer to them accordingly.
  3. Never feed a human love asset after midnight (you will thank us later).

If you don’t follow these simple rules, you run the risk of a severe diminution in the value of your human love asset portfolio.

HT to Orges

Quotes Entirely Relevant to Investing 03-15-2009

-The Hitchhiker’s Guide to the Galaxy

Past Quotes Entirely Relevant to Investing

Recipes for Money

Recipe for Money (2006)

  • Find an asset, any asset will do, but preferably a fresh organic fair-trade asset.
  • Add 1/4 cup soy sauce.
  • Add 2 slices of Government cheese.
  • Season with leverage. Continue to season with additional leverage until the money tastes to your liking.
  • Serves many.

Recipe for Money (2009).

  • Find a leveraged asset, any asset will do, but preferably a McMansion or McInvesment Bank one, ones that are made of horse and dingo meat.
  • Add mashed sweet potatoes.
  • Add 14 slices of Government cheese.
  • Short sell this concoction to taste. Continue short selling until the money tastes to your liking.
  • Serves few.

Mental Conditioning

Everyone uses the phrase killing it and the bear market version “[fill in the blank return] is the new killing it”. But I have to be honest…when I look at the market, and the S&P 500 is only down say 5 points, my mental accounting puts that in the win column. That’s tantamount to a rally, hell it’s not tantamount, it’s mount to a rally. When I hear “oh the market is up 5 points”, I think in my head “It’s only down -5 points, I barely even understand what that means” and then I freak the hell out.

The turns and spins and dives and rises of this market have been like a baptism in biasfire. I feel every single dumb bias at different points in a day. Loss aversion, mental accounting, regret minimization, anchoring, representativeness, overconfidence, everything, a veritable CFA clinic on biases. I am that clinic.

And I wonder — is this how scientologists are made? They heat up the room, assault you with information overload, starve you, break you, push all your preconceptions, tear them down, question you, make you question yourself, have Paulson or Geithner say something officially vague and stupid, make you agree with them and eventually, with Xenu. Market I agree with you! Tell me what you want! I will do it!

We Are Not The Cephalopod’s Hecubus

Certain amongst us, specifically species-traitors at the New England Acquarium, are helping octopi enrich themselves in the fields of box survival and daytime infiltration.

Truman, a 7-foot-long, 30-pound octopus at the New England Aquarium squeezed his body into a 14-inch square acrylic box today in pursuit of food, aquarium officials said. The 30-minute performance drew a crowd of staff and guests.

The caretakers for the octopi at the aquarium place food inside locked boxes as an enrichment activity.

And rather than undoing the latch on the larger box, he squeezed his legs and large head through a two-inch hole in the larger box.

The grossest thing I have ever seen involved a cephalopod and a box but is not this picture

Recommendation: While this strengthens our long recommendation for the Cephalopod Index, don’t confuse our investment recommendation with any changes of species allegiance implied or otherwise. We refuse aid, comfort, and combat skills training to the enemipods out there.

Know that any object that has a 2 inch opening and is 12 square inches or larger (like a toilet bowl while you sit on it…), is one in which an octopus could be lurking, waiting for you, its tentacles ready to wrap you in seaweed and suck you into their razor sharp beak, a process known as “reverse sushi”.

HT Adam

Quotes Entirely Relevant to Investing 03-08-2009

What goes down will come up — unless destructive policies interfere with the sources of potential recovery.
WSJ Opinion Journal (HT SCH)

Past Quotes Entirely Relevant to Investing

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