Long or Short Capital

Long or Short has long covered the piratery sector. Recent retail hand bag developments have mandated we review the sector, using our patented “Bottom or Top” analysis.

Pictured above is the Ralph Lauren Pirate Motif Billfold and Integrated Credit Card Holder ($355.00) captured in the wilds of Ralph Lauren display cases.

We think this kind of pirate pandering is starting to point to the the fact that while the seas are still frothy for piratery, a correction will create a fashionable buying opportunity. The CTA we don’t have indicates that such an opportunity will present itself in 18 days. If you look at this bag you can see a clear 18 day skull and cross bones formation, which any technician worth his salt knows means:
“Day 1-12: Do not buy
Day 12-17: Prepare yourself and your portfolio with jolly ranchers and Mount Gay (have you got a little Captin’ in you?)
Day 18: Buy”

The Legal profession is a mature industry that has recently entered the “decline” phase of the service offering life cycle. This analyst expects significant decline in the industry and a “Short Legal Professionals” recommendation is a key part of this research.

Though once a critical industry key (even essential) to unlocking value in several areas including:

• Large and unwarranted money damages (pure windfalls)
• Access to key decision makers in the highly liquid and competitive market for favorable legislation (lobbying)
• Freedom (from incarceration after pressing the limits of the capitalist system to the edge)

Legal professionals and the industry show several signs that compel us to “call the top.” These include:

1. I. Lewis “Scooter” Libby (J.D. Columbia, 1975).

Indicted on five felony counts and subsequently convicted in March 2007 and sentenced in June 2007 on four of the counts despite strong evidence that the underlying offense never took place and the recanting of at least one grand jury witness. Even Mr. Libby’s close ties to the most powerful man on earth (Vladimir Putin) failed him and a pardon, usually par for the course and despite his connection with the second most powerful man on the planet (Dick Chaney), seems unlikely. Most concerning, one of the counts was “obstruction of justice,” an ignominious allegation for any lawyer to endure. (Perjury and “making false statements,” by contrast, are absurdly common in the field).

2. Jack Abramroff (J.D. Georgetown, 1986).

Pled guilty on January 3, 2006, to three criminal felony counts in a Washington, D.C., federal court, then on January 4, pled guilty to two criminal felony counts in a separate federal court, in Miami. Subsequently sentenced to five years and 10 months in prison and ordered to pay restitution of more than $21 million. Abramroff’s connection to the second most powerful man in the world also failed him.

3. Richard A. Hutton (J.D. University of California, Los Angeles, 1970).

Who, despite vigorous argument that his client was a “victim of an unfair and unjust legal system,” failed to secure more than a 20 day reduction in sentence for Paris Hilton (despite a six-figure legal bill).

4. Dr. Charles Sophy (Medical Director for the Los Angeles County Department of Children and Family Services and Associate Clinical Professor of Psychiatry at the University of California Los Angeles Neuro-Psychiatric Institute).

Has with a few choice words has managed to extricate Ms. Hilton from:

A. Testifying in a civil suit against her brought by actress and diamond heiress Zeta Graff. (“She is too emotionally distraught and traumatized over her sentence.”)
B. Arriving on-time to her various DUI hearings. (“Ms. Hilton cannot effectively respond to examination as a witness or provide any significant input into her defense.”)
C. Being interviewed by correctional officials to determine her eligibility for a “special needs unit.” (“Ms. Hilton is not capable of any meaningful participation.”)
D. Serving more than 70 hours of her 25 day jail sentence actually IN the correctional facility. (Via close consultation with a correctional review board).

The aggressive move of the medical profession into areas once served by the legal community is a huge indicator and prompts our very strong Long position in the industry.

Investors should consider the arbitrage opportunities of going Short the United States as more and more consequenceless behavior is encouraged, “undisclosed medical conditions,” become trump cards for any offense and annoying, hopelessly spoiled blond girls gain significant market share.

Recommendation:

Long Medical Professionals owing to their newly developing powers and wealth transfer from the United States.
Long Annoying, Hopelessly Spoiled Blond Girls owing to their close channel marketing relationships with Medical Professionals and the consequent wealth transfer from the United States.
Short Legal Professionals owing to the decline in their influence, power, wealth and freedom.
Short the United States but more Short Canada, because Canada still sucks.

Short: American Express Red Card
Long:: American Express Black Card

One has the veneer of charity. One is for winners.

vs

Also Short: Bono, Scarlet Letters

Dedicated to providing our readers with the bloody edge of globally diverse venture opportunities, our recent research has revealed that multiple opportunities in the “Death Squad Start Up” business exist. This research supersedes our recent recommendations in the armed piracy sector.

Start up costs are extraordinarily small, given the strength of the U.S. Dollar in the region and the low cost of critical hardware (RPGs, AK-47 models, etc.) many of which are obtainable via salvage efforts at local weapons caches and abandoned armories. Triple digit IRRs with high liquidity are easily obtainable. (Our model shows a 355% IRR in Year 2).

A sample P&L for a typical venture is attached.

References: Build your own Iraqi Police Squad for a Little Cash
Recommendation: Long Death Squad Startups; think Piratery but with more murder and less rum.

Today, a recurring Dealbreaker feature involving Dick Grasso has spurred our analysts to break another aspect of the scandal involving David Delainey and Mark Davison, first exposed by Long or Short and threatening to engulf Wall Street: Star Trek Celebrity Imposters on Wall Street.

The Dick Grasso article clued in one of our staff who, on further investigation, has revealed that Mr. Grasso is also involved in the imposter scandal. Mr. Grasso has reportedly been taking fees for appearances at various Star Trek functions as “Arturus,” a guest character on Star Trek Voyager played by Ray Wise, reknowned for his role as Leland Palmer on Twin Peaks, and more lately, as the Vice President of the United States on 24.

Alien Imposter Dick Grasso?

Recommendation: Short Dick Grasso, Star Trek in all forms. Underweight “Alien Nation”.  As always, accumulate the Wookie.

Recent research by Long or Short questions the purchasing power of the Family of Four (“FoF”).  During the process of investigating pricing changes relevant to the decline of FoF purchasing power, Long or Short also identified several trends in the wholesale and retail drug trade.

Increasing prices in Cocaine and other “A-List” narcotics have jump-started online disintermediation of street dealers and spawned a growing industry in price comparison for illicit drugs. MSN is the first internet provider to jump into the fray as the links below show:

Heroin in the Age of Crack-Cocaine price comparison at MSN Shopping Compare Heroin in the Age of Crack-Cocaine prices before you buy to make sure you get the best deal. (link)

Free Cocaine price comparison at MSN Shopping
Compare Free Cocaine prices before you buy to make sure you get the best deal. Find a list of Free Cocaine prices from multiple vendors at MSN Shopping. (link)

MSN’s entry into the marketplace will exert strong downward pricing pressure and is sure to bring other entrants (GOOG) into the market. This loss of pricing power compounds the pressures on the The Big Three (cocaine, marijuana and heroin), as the more nimble, efficient and market responsive meth, as well as a host of other addictive drugs, continue to grab market share. With their high legacy social stigma costs, the Big Three may very well not be able to adjust their position to compete effectively with the upstarts.

Recommendation: Short Cocaine, Heroin, Microsoft (MSFT). Long Investment Bankers (due to increased disposable income from dropping cocaine prices).

Recently, Carl Icon, a noted corporate raider and greenmailer and Chairman of Liquid Icon Capital, LLC (“LIC”), announced his acquisition of a significant block of Long or Short Capital, LLC stock along with his intention to compel changes in management here at Long or Short.

Because we are happy in our cushy offices and enjoy our substantially over-inflated salaries and bonus plans ripe with inexorable options in a fictious stock, we have responded immediately to the threat to luxury with a multi-point takeover defense plan ready for instant implementation. This plan includes the following takeover defense measures:

1. An aggressive “soft landing” for each member of the Long or Short team involving modest* severance packages in the event of any change of control in Long or Short. (Golden Parachute Defense).
2. We have arranged with our present bank to increase our interest rate for the outstanding amount of debt we hold by 54% in the event of a change of control. We will, of course, split the interest with the bank, since it was our idea. (Bankmail Defense).
3. The right of current Long or Short shareholders to buy current Long or Short stock at a deep (95%) discount if any takeover bid is mounted. (Flip-in Defense).
4. A concentrated program of hysterical crying, drinking and sedative use during this highly stressful period. (Keith Richards Defense). We are also considering holding our breath until either we pass out or Mr. Icon goes away (Blue in the Face Defense).
5. A one month** vacation in an undisclosed tropical location without extradition treaties with the United States for all the executives at Long or Short. (Skip Bail Defense).

We are highly confident that our superior management skills and expert spending ability will permit us to prevail over this vicious interloper whose only interest, and a shallow one at that, is superior returns for the paid-in shareholders of Long or Short.

Sincerely,

The Long or Short Management Team

Back Row, Left to Right: Julia Mezzanine Tranche, Johnny Debacle, Mr. Juggles, Justice Steven Breyer
Front Row, Left to Right: Kaiser Edamame, Dr. Deep Gupta, Justice William Hubbs Rehnquist, Female to be Named Later, Justice Anthony M. Kennedy

Continuing investigation by Long or Short Capital into the widening “Star Trek Imposter” scandal has revealed that Pitt-Fox, Kelton’s Head of Corporate Finance Mr. Mark Davison has also been embroiled in the controversy.

Prosecutors allege that Mr. Davison has been supplementing his income (and failing to report it) via similar Star Trek convention gambits as recently uncovered by Long and Short with respect to Enron bad-guy/Star Trek android David Delainey.

It appears Mr. Davison has been posing as Robert Picardo, Star Trek Voyager’s “Holo Doctor.” As a more secondary character, it appears Mr. Davison’s fraudulently obtained fees were substantially less than those commanded by Mr. Delainey.

A double life?

Recommendation: Short Mark Davison. Double Underweight Star Trek conferences. (Consider the “Double Star Trek Bear” fund). Accumulate the Wookie (again).

Julia Mezzanine Tranche is an analyst at Long and Short, the author of Going Private, as well as a member of the Non-Certified Advice Columnists of America, the International Society of Bad Advice Columnists and Chairwoman of the Prestigious European Association for Paperclip Entrepeneurs and Analysts (PEAPEA).

Note: some letters may be “enhanced” for self-glorification.

Dear Julia:

Recently, Long or Short Capital’s Johnny Debacle wrote an [interesting and dynamic piece on Phantom Bonds totally characteristic of the brilliant analysis that typifies Long or Short Capital]. He indicates:

If you have a 20 year plus horizon, then you probably want an allocation that is heavily weighted towards equity, say 90-100%. But you could supplement a 100% equity allocation with an incremental 20-30% of phantom bonds, without disrupting your asset allocation.

As I am 102 years old, my own horizon is somewhat shorter. Can you recommend some Phantom Bond allocations that might be better for my needs?

Signed,
I’m Dreadfully Hearing Impaired in Tiny Ithica, Texas.

Dear IDHITIT:

You are right to notice that Mr. Debacle’s allocation recommendations are not for you. Since you are likely to kick the bucket any day now I have two alternative recommendations for you:

• Put 100% of your portfolio in Phantom Bonds. It’s true that the commissions will be expensive but your tax burden will be very small (as all the returns on Phantom Bonds are also Phantom Returns) and your estate may well have NOL carry forwards.
• Put 100% of your portfolio in Google. Admittedly, this lacks diversity but your time horizon is so short that you are CERTAIN to clean up on this trade before we run out of greater fools. Prescott R. Moncrief III over at Goldman is a good sell-side guy to know, I suggest giving him a call.

Dear Julia:

I am an Associate in a large bulge bracket banking firm the logo of which I’m sure you would recognize. I don’t want to name it but it rhymes with “Virgin Snacks.”

Two of the Vice Presidents there ask me out constantly, make lude gestures and spank my bottom when I pass by their desks. One of them asked me to do something called “bobbing the pole under my desk while I’m on a conference call with Spitzer.” I’m not sure what that means exactly (Does it involve wine spritzers? Because, I prefer Smirnoff Ice.) but it sounds like a violation of firm policy. I am at a loss as to how to handle the situation.

Both of them are extremely well regarded in the firm and they bring huge segments of business into their department. They are also both extremely well socially connected in Manhattan. Their offices are a literal revolving door of meetings for a Who’s Who in Finance and Business roster during the afternoon.

I’m sure you can understand my distress at their simultaneous overtures. Obviously, how I deal with the matter could have deleterious effects on my career. Can you help me decide how to handle the situation? I don’t know which one to sleep with first.

Desperately,
Bulgebracket & Tax Girl

Dear B&T Girl

Finance, like life is dependent upon the effective allocation of resources. You need to prioritize and allocate accordingly. I recommend picking the one who lives in the American Gardens Building.

Have issues for Julia? Email your special situations, turnaround questions, advice on unwiding complex positions, insider tips or merger complications to: Dear Julia Drop Box

Full Disclosure: Julia is Short Ann Landers and Long Ann Sather, which may bias her advice.
*Highly attractive portrait above may actually be of (and by) Noli Novak.

Long or Short Capital has initiated prophylactic coverage of “Boy-on-Boy” in conjunction with recently picking up “Girl-on-Girl.”

The Boy-on-Boy space is saturated by multiple market actors and opportunities for price discrimination are muddled by a highly fragmented marketplace. Increasing commoditization in the space limits opportunities for upside absent domination by a stronger alpha player. In addition, low or no barriers to entry mean that the stiff foreign competition (Dutch in particular) has deeply penetrated the nearly frictionless space from the bottom up.

Though recent interest in the market by regulators and Google (NASDAQ: GOOG -0.94/-0.27%) may restrict supply, unregulated foreign access to loose markets is too potent for significant supply disruptions.

Strong players, even those with multiple prior acquisitions in their portfolio, will have difficulty forming a cohesive long-term coupling with smaller market players therefore frustrating attempts to bag multiple targets and develop a dominant position behind other players.

Recommendation: Short Boy-on-Boy.

(Read GOOG, No Means Yes Baby Part 1 and GOOG, No Means Yes Baby Part 2 )

Intrigued by the reaction of Mr. Moncrief, in Part 1 and the general inability of these analysts to take “No” for an answer, this analyst arranged for an interview at Mr. Moncrief’s midtown offices. We were particularly interested in the impact personalities might have on sell-side professionals. What was the model for their attitude about these stocks that seemed to defy all caution? Ignore all negative news? The transcript is attached below.

Prescott R. Moncrief III (on phone): “…c’mon Bateman. We’ll kamikaze over to Nell’s, chase some cotton underwear. Charlie Cushing knows this 18-year-old bimbette that’s gor-geous. Hold on. WOAH! This skirt who looks just like Ailcia Witt back when she was still hot, like in that Sopranos ep, just walked in, let me call you back, Patrick. Hello. What have we here? I’m Prescott R. Moncrief III, the administrator of this facility. And who might you be?”

Julia Mezzanine Tranche: “Julia Tranche, from Long or Short Capital. We had an appointment to discuss your comments on Google’s recent…”

PM: “Woah, woah. She meant nothing to me. Really. Please, have a seat. Buy me a drink?”

JT: “A drink?”

PM: “Why, yes. I’d love one. Thank you. Vodka Martini. Up. Olives. Dirty. No shitty vodka either. Use the Grey Goose or the Chopin. Chopin, you know, isn’t grain vodka. It’s potato. Much smoother. And much more expensive. Put the money in that tip jar over there.”

JT: “Uh, it’s 10:30 in the morning.”

PM: “It’s 7:30 p.m. somewhere in the world.”

JT: “Er, I really don’t think…”

PM: “Hey, look, honey, I don’t buy drinks for women. Haven’t you read Neil Strauss?”

JT: “Really, just a water is fine for me.”

PM: “Alright, alright, here. I’ll make an exception. You will be having a Smirnoff Ice. That’s it though. I don’t buy women drinks. Here. Ok. You will have a Jagermeister shot too. Two of them. Ignore that blue powdery residue floating in it.”

JT: “You have a bar in your office?”

PM: “Don’t you? Wait, where do you work again? You’re not one of the bridge and tunnel girls are you?”

JT: “Long or Short Capital, the independent analyst group.”

PM: “Where are your offices?”

JT: “Uh, Midtown?”

PM: “WHERE in Midtown?”

JT: “Fifth and…”

PM: “Hmmm, ok, where do you live?”

JT: “Gramecy.”

PM (getting up): “Get your coat. We’ll go back to my place. I live at the American Gardens Building.”

JT: “Uh, no really, I think it best if we just stick to the interview.”

PM: “I said, I live at the American… Gardens… Building. You know, where Tom Cruise lives? Ok, ok, I hear you. We can take it slow. Let’s just sit for awhile and talk, right? We can just lay together for a while and cuddle. Nothing is going to happen that you don’t want to happen.”

JT: “Uh, Mr. Moncrief, there’s not enough room in this chair for both of us.”

PM: “Well, you’ll just have to sit on my lap then, baby.”

JT: “Look, maybe if there was more room?”

PM: “You want to move over to the couch there eh? Good idea, it’s much more comfortable. It’s a little squeaky though.”

JT: “Maybe we should just keep this meeting professional? Isn’t your assistant in the next room?”

PM: “You want her to join us? She’s cool with that. You think I wouldn’t have fired her already if she wasn’t a good sport? She knows where her bread is buttered. If you know what I mean. Wait, you’re not a working girl are you? I knew it! I knew you were too hot to be true! Damnit.”

JT: “Look, I’m not…”

PM (opening wallet, several $100 bills fall out): “Look, I’ll pay $500, but I expect some serious action. None of this ‘one hour only’ stuff either.”

JT: “Maybe we can just talk about Google?”

PM: “What do you want to talk about that old tramp for? Yeah, yeah, she’s been bucking quite a ride, so what? Lots of last minute resistance. Always with the ‘not so fast, I’m not ready for that’ and ‘that growth is a bit quick for me,’ ‘all you want is a hot piece of dividend,’ or ‘you expect too much too fast.’ She plays hard to get, sure. Lots of people have an interest in her, but those milky thighs always loosen up quick for the right price. Of course, her taste is getting expensive now. All the big bankers are working her. I had her first though, you know, back before the CSFB guys passed her around. Before she got a big head and started throwing big parties and stuff. Her day in the sun is over soon. Trust me. I just talk her up in public. Around the other guys, you know? But don’t quote me or anything. I have a reputation to keep, after all. As long as she puts out for me I’ll talk her up. Why not? She looks better on my arm that way. That’s not going to last forever, of course. But that’s just conversation. How about we get real? You and me, sweating between satin sheets?”

JT: “Uh, Mr. Moncrief, could you please take your hand off my leg?”

PM: “Awww, c’mon baby. What’s the matter? Don’t you know I’m a Vice President at Goldman Sachs?”

Assistant on the Intercom: “Mr. Moncrief, your 11 o’clock is here.”

PM: “Ok, gotta hop honey. You don’t gotta go home but you got to get the hell up outta here. Yahoo is here. Whoo! That issue can draw capital through 50 feet of garden hose. Oh, I don’t give my number to women so, give me your card. Maybe I’ll call. Maybe not.”

In connection with recent recommendations on piracy, Long or Short Capital’s managers have been closely tracking developments in the privateer market. So too has one famous Nebraskan investing guru.

We have uncovered renewed interest by Berkshire Hathaway in piratery and, in fact, the adoption of piracy directly by Berkshire’s Warren Buffett, and therefore we are boosting our recommendation.

Recommendation: The piratery theme is approaching the mania stage, and as such, we think that it may be time to adjust your investments from direct piratery to investing in the enablers of piratery. Note that value investors like Berkshire Hathaway (BRK.B) are noting this as well. As we recommended in our Long Mudpies analysis, in sectors with a “gold rush” mentality, it’s the producers of the “picks and axes” that benefit the most surely. One way to play this would be to pick up some long dated call options on both tier 1 and tier 2 eye-patch manufacturers; currently, options on the brewers of the finest rums in the seven seas are all trading at premiums that make them less attractive, but still delicious.

The Wall Street Journal is reporting “Novartis to Pay Infinity to Develop Cancer Treatments”

While we are all for cancer research, it will be really hard to get attractive returns for shareholders on an initial investment of infinity dollars. However, Google (GOOG) may reach the point where a stock-for-stock deal could make sense. Calculating this accretion will require more analysis.

Recommendation: Short Novartis because projects requiring Infinity dollars tend to disappoint; Infinity-1 remains our price target for GOOG.

(Read GOOG, No Means Yes Baby Part 1)

Quiz: Place the two statements in chronological order.

Statement 1: Google (Related Reports) Letter to shareholders-

We will make decisions on the business fundamentals, not accounting considerations, and always with the long term welfare of our company and shareholders in mind. Although we may discuss long term trends in our business, we do not plan to give earnings guidance in the traditional sense. We are not able to predict our business within a narrow range for each quarter. We recognize that our duty is to advance our shareholders’ interests, and we believe that artificially creating short term target numbers serves our shareholders poorly. We would prefer not to be asked to make such predictions, and if asked we will respectfully decline. A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.

Statement 2: Associated Press Story-

Google Inc. executives provided investment analysts with a bright outlook Thursday in a display of confidence that appeared aimed at defusing growth concerns raised by the search engine leader’s chief financial officer earlier this week.

Schmidt underscored his optimism at one point by saying Google someday might generate $100 billion in annual revenue as it expands into a variety of new advertising channels, including television, radio and publishing. The 7-year-old company’s revenue totaled $6.1 billion last year.