Author Archive

Cephalopod Long, now with Science

It’s happening. “Cephalopod populations are proliferating in response to a changing environment.”

Cephalopod populations are highly responsive to environmental change, with anthropogenic climate change, especially ocean warming, a plausible driver…

Cephalopods have a unique set of biological traits, including rapid growth, short lifespans and strong life-history plasticity, allowing them to adapt quickly to changing environmental conditions.

Cephalopod population dynamics are notoriously difficult to predict…

Cephalopods are voracious and adaptable predators and increased predation by cephalopods could impact many prey species [like mutual fund investors and rich outsiders who finance movie production].

We have advised many clients on the importance of the cephalopod trade and the maelstrom it represents for humankind. “Long cephalopods” was actually one of our very first recommendations. And as usual, we are seeing that science lags but ultimately catches up to the satirical, abstract, finance. Long or Short asked and answered the hard question of “Who stands to benefit from global warming and who is therefore most likely to be behind it” in our landmark piece, Cephalopod Positions: Rising from Underwater. Now we’re seeing our investment thesis play out in real time.

To wit:

  • Rising ocean temperature = increasing squid population
  • Rising oceans from rising ocean temperatures = increased habitable area for squids, decreased habitable area for humankind
  • Increasing cephalopod biomass = increasing food requirements for voracious cephalopod predators
  • I am delicious = I am future cephalopod overlords’ food source

The math speaks for itself.

Recommendation: HODL THE DOOR on CEPH. We say this as long time hodlers of The Cephalopod Index.

Long or Short Cephalopod Research:

Zambinomics, the new Zimbabwenomics

Flation be goneMight there be a higher power than the Yellen?

Zambia will hold a day of prayer and fasting on Sunday, with bars shut and football matches cancelled, to seek divine help over the country’s currency collapse and dire economic woes.

Food prices have soared and crippling power shortages have also been triggered by low water-levels in Lake Kariba, where hydropower plants supply much of the country’s electricity.

“God is a god of miracles and if we ask him, he will bless us and the kwacha shall be restored to its former strength and the prices of goods shall again go down,’ Bishop Simon Chihana…told AFP.

Paid up subscriberholders know Zimbabwenomics has been revolutionizing economics and investing alike ever since humanitarian/economimst Robert Mugabe first launched the field. Every kleptocrat and savvy investor that heeded our related recommendations has gotten richer than Croesus. You’re welcome.

Well money never sleeps, and we’re totally money, so neither do we. We’ve spent the last several years traveling around the Dark Continent (Wikipedia describes the Dark Continent as “A phrase in declining usage to describe Africa” — I can’t imagine why that usage has been in decline, seems ok to me) to uncover a new strain of disruptive economics, Zambinomics. The new field is a natural iteration of Zimbabwenomics’ cornerstone, Mugabe Efficiency Theory:

Per MET, when supply is too dear, government fiat is needed to price it where demand can buy it. Problem solved, supply and demand clearly balanced and the cosmos is once again in order.

A Zambinomic approach would be that if supply is too dear, you pray to God and she makes supply cheaper. Or if your currency has too much flation, you get everyone together and pray the flation away. In Zambinomics, government fiat is superseded by the highest authority there is — God (or Gods or even the Flying Spaghetti Monster for all our Pastafarian readers).

Recommendation: Long gone will be the days of everyone hanging over all the cryptic gobbledygook that comes out of the mouths of Greenspans, Bernankes, and Yellens. In again will be the days of everyone hanging all over the cryptic gobbledygook that comes out of the mouths of virgins stoned out of their minds on cave gas. That is as it should be. Long ARG (NASDAQ: ARG) and all makers of cave gas.

I’d like to dedicate this post to Sage Kelly who said we should start writing more often. Sage, we heard you loud and clear 7 months ago and as you can see, we’re on it.

Long YOLO Notes

They’re back, dudes, they’re back. Just like those canaries in those coal mines, PIK toggle notes are back and they are ready to party until they are dead because that is why and how canaries die in coal mines.

Scene from a coal mine:
“What’s that gassy smell, Fitz?”
“I don’t know, Mac, but that canary looks like it partied itself to death. Let’s keep hacking away down in this coal mine like everything is a-ok.”

What’s a PIK toggle note? Imagine a debt security that paid you very little each year and then your money back in 10 years if everything goes perfectly, nothing if things don’t go perfectly, and precisely zero if things go poorly. PIK toggle notes (sometimes known as “contingent cash-pay”) meet Dangerous Fund I’s suitability requirements, which are stringent, but they don’t seem to make sense for regular way money managers. Yet they’re selling like hotcakes. BlueLine Rental, Party City,, Viking Cruises, Infor, BMC Software, Hot Topic and Michael Baker– these are all the PIK toggle flavors that have been available to yield-desperate fixed income shops lately.

While many market observers have scoffed at PIK toggles, we think these MOs are missing the big picture. Namely that these funds buying PIK toggles on behalf of pensions, grandmas, and HNWIs aren’t actually naïve, risk-obsessed maroons. No, these buyers are the ones who truly get PIK toggle better than anyone. These buyers fully understand that PIK toggle notes aren’t really PIK toggle notes at all — they are YOLO notes.

What happens if things go wrong? YOLO. What happens if things go ok? YOLO. Who wants returnless risk? YOLO. These savvy, returnless-risk-obsessed maroons understand the asymmetrical relationship their compensation has to their investors’ risks — in others words, they know YOLO.

Recommendation: Long YOLO notes because YOLO. Really long just about anything because YOLO.

SEC Disclosure: Dangerous Fund I, managed by Tinderbox Capital LLC, a subsidiary of Long or Short Capital LLC, has indiscriminately bought PIK toggle notes to such an extent that it is unclear how much PIK toggle Dangerous Fund I actually owns. Due to the layering of a diversification strategy similar to that deployed in Diversifying Fund I, it is also not possible for Tinderbox Capital to know what its actual positions in Dangerous Fund I are. Tinderbox Capital employs SAAP and “best guess” techniques to estimate their positions. I guess what we’re saying is we might not actually own any PIK toggle notes and if so you can just ignore this disclosure, which — if I’m being perfectly honest — why are you still reading? This is fine print, you’re supposed to tune it out, like the footnotes attached to numbers in prospectuses. This is not the adjusted EPS you’re looking for.

Cypriot Experiments: Mugabe Optimality in Banking

Something is going on in Cyprus. It’s been difficult for us to figure out the details due to the tough conditions: 15 years later we still can’t figure out how to use Bloomberg for anything other than financial AIM (we bloom dudes all day long); ever since Google murdered Google Reader (future murdered, if you’re being technical or pedantic, you bastard), we’ve forsaken all of Google’s products and services — as it turns out, the internet is basically useless without Google, especially since our fallback, Lycos, doesn’t work nearly as well as when we originally designed our internal disaster recovery redundancy redundancy plan.

We’ve had to use phones to talk to people (not in person, thank god) about the situation. Our determination: it’s “not good.” Especially for people that appreciate the service that banks provide wherein they hold your money for you, write it down on a list or whatever, and then give it back to you when you ask for it. This service that banks provide is known as “banking.”

As it turns out, this romanticized version of banking service was not how it always worked out. Sometimes there were panics or runs and you couldn’t get your money out. These panics used to happen from time to time, until most of civilization adopted deposit insurance schemes wherein a national government insures all depositors in a nation’s banks up to a certain amount. Deposit insurance is one reason why North Korea’s banking industry has been so stable the last decade; the other reason is that North Korea’s banking industry doesn’t exist (known in some circles as “Too Small To Fail,” research to follow).

Ok, so now this whole banking thing is fine, right? Panics hardly ever happen now, so no worries? Yes! But also, unfortunately, no. Because markets are weird and adaptive and respond to incentives, and regulations of various kinds have made it such that banks had (and have!) an asymmetrical relationship with risk AND incentives to do things like lend gobs of money at low rates to Greece because it’s “riskless.” In an unforeseeable “Grek” tragedy, these things have led to banking instability, one that deposit insurance can’t address.

But there is an even better way to ensure banking stability, even better than deposit insurance or banks not making terrible loans with no repercussions. Banks can simply take their depositors money. This is the most exciting Zimbabweconomic development since Zimbabwe itself pioneered even freer trade. So while the situation in Cyprus is “not good,” you could also say it could lead to something “really great.” Like this:

The core problem facing the world is banking instability. But right inside their own vaults and on their own electronic ledgers, these banks have the means to enhance their own stability. In Cyprus, they wimped out and deployed half measures by taking something like 40% or 50% of depositors’ deposits. Wouldn’t the banks, and in turns the world, be a lot more stable if they took 100% of depositors’ deposits? This would maximize banking stability and minimize banking instability’s impactfulness on bondholders. We’re not scientists, we’re economists, and this looks Mugabe Optimal to us.

Recommendation: We recommend that banks seize all of their depositors’ deposits. Be sure to call the act something harmless like “lollipops” or “haircuts” or “puppies”.

“The bank bestowed 100% puppies to all its fortunate, stability-loving customers.”

“I went into get my money from the bank and got a trim! I look great! Thanks, Banco Unioni di Cyprus.”

This seizure will be Mugabe Optimal according to the paper we won’t publish featuring the proof we didn’t do about the assumption-heavy autarky we modeled using the math we mostly made up.

Given the world’s likely move to a Mugabe Optimal banking state, Long or Short investors ought exercise caution when depositing money in anything called a “bank.” Safer places for your money include Dangerous Fund I, Dangerous Fund II, any mattress, any resource, any box, any location in your house either hidden or in the open, on your person, hanging out of your pants pocket, pre-buying with your drug dealer, a stripper’s g-string, diamonds, real estate in Zimbabwe, a vanity license plate for your mega-yacht, a vanity license plate for your deep-sea submersible vehicle (the new mega yacht, research to follow), a tar pit, that thing from Star Wars that ate Boba Fett, etc.


A concerning trend is whether our leaders actually believe in capitalism at all anymore. Here is a recent speech from Ben Bernanke (it’s pretty boring so prepare yourself appropriately with stimulants whatever their origins):

Today most advanced industrial economies remain, to varying extents, in the grip of slow recoveries from the Great Recession. With inflation generally contained, central banks in these countries are providing accommodative monetary policies to support growth. Do these policies constitute competitive devaluations? To the contrary, because monetary policy is accommodative in the great majority of advanced industrial economies, one would not expect large and persistent changes in the configuration of exchange rates among these countries. The benefits of monetary accommodation in the advanced economies are not created in any significant way by changes in exchange rates; they come instead from the support for domestic aggregate demand in each country or region. Moreover, because stronger growth in each economy confers beneficial spillovers to trading partners, these policies are not “beggar-thy-neighbor” but rather are positive-sum, “enrich-thy-neighbor” actions.

Did you notice it? That speech was less than 1% capitalistic. Shocking, I know, but it’s not a new trend.

Here is an excerpt from President Bush’s September 2008 speech on the financial crisis:

Financial assets related to home mortgages have lost value during the house decline, and the banks holding these assets have restricted credit. As a result, our entire economy is in danger.

So I propose that the federal government reduce the risk posed by these troubled assets and supply urgently needed money so banks and other financial institutions can avoid collapse and resume lending.

This rescue effort is not aimed at preserving any individual company or industry. It is aimed at preserving America’s overall economy.

Bush does a little better but is still less than 1.5% capitalistic. It’s less capitalistic than this communist scrawl:

Никита Сергеевич Хрущёв

We can find few if any world leaders who resemble true capitalists. Most only deploy capitalism when it’s mandated by structure, like right after things have hit a full stop, or in situations wherein to not do so would be an embarrassing faux pas, like in America.


Diversifying Fund I

Tinderbox Capital LLC, an incendiary investment management firm and subsidiary of Long or Short Capital LLC, announces its third fund, Diversifying Fund I.

Diversifying Fund I will specialize in offering the purest form of diversification available to investors. Tinderbox Capital will allocate physical cash into a physical box that we’ve painted black. This box will be known as the Black Box of Diversification. After that, no one knows what will happen to that physical cash. Anything could happen to it. It could double. It could halve. It could triple. It could third. It could N. It could 1/N. It could become sentient, take all your money and bet it on 17 at a roulette wheel and make you crazy rich. No one knows what happens in the Black Box of Diversification. That inability to know what returns your cash will generate provides you with an investment product that has no correlation to any other investment or asset class. Tinderbox Capital’s due diligence process for Diversifying Fund I has consisted mainly of practicing typing “diversifying” really quickly (seriously, try it, not as easy as it looks).

Tinderbox Spokesman Johnny Debacle:

“Assets in the investment universe are crazy correlated. There is probably a way to quantify this, but that seems difficult. Difficult does not fit our business model. As things get especially bad or as market participants pile into the same formerly exotic and diversified assets in the endless quest for yield, cross asset correlations push ever higher. What people need is the ability to truly diversify their portfolios. They need Diversifying Fund I.

Our last two funds, Dangerous Fund I and Dangerous Fund II, filled the niches they sought to plug. Each has been panacea to investors who were overweight return and underweight risk. “Riskless risk” is the most efficient risk producing innovation that any investment management company has designed yet, despite how hard Paulson & Co have been working at their own proprietary solution(s). Now it’s time for us to do for Diversification what we did for Risk. Also, Dangerous Fund II is a smoldering pit of dollar bills from which we’ve already harvested all our fees, and we need to feed our families…really expensive platinum-plated snow leopard sushi designed by Apple.

Diversifying Fund I will offer the fullest diversification available to investors. Tinderbox Capital will charge a traditional 2 and 20 fee structure for managing Diversifying Fund I. 98% of investor subscriptions will be allocated to the Black Box of Diversification and 2% to the Reserve Box. Management fees will be collected from the Reserve Box. The Reserve Box will be painted green to assure that we do not confuse the Reserve Box with the Black Box of Diversification. We make no guarantees that we will not either intentionally or unintentionally confuse the two boxes. This lack of guarantees offers another layer of diversification. Performance fees will be determined by applying 20% to arbitrary amounts taken by management from the Black Box of Diversification. Any investor who wants to redeem their investment from Diversifying Fund I is free to make such a request at any time. Upon the receipt of such a request, we will stick our hands into the Black Box of Diversification and remove some cash. Then we will likely put the cash back into the Black Box of Diversification because our management agreement gives us discretion as to whether we honor redemption requests. This discretion provides yet another layer of diversification. See the prospectus for more details.

We know that young risk-seeking investors demand places to put their money to work, places where they can allocate $10,000 and potentially lose it all. This is the niche that Dangerous Fund I filled. We also know that young risk-seeking investors demand places to put their money to work, places where they can allocate $10,000 and certainly lose it all. This is the niche that Dangerous Fund II filled. Dangerous Fund I and II are appropriate for investors whose portfolios are overweight return and underweight risk and are thus seeking proper balance. Now that these young investors have portfolios that are perfectly balanced with respect to risk/return, they need diversification. Diversifying Fund I is appropriate for investors who portfolios don’t have enough diversification

This fund may not be appropriate for everyone, but for you it’s perfect.”

Tinderbox Capital LLC is an investment firm that offers a focused set of investment products to a global institutional and high net worth client base. Tinderbox Capital LLC is currently structured to directly manage strategies in so-called “dangerous” trades, to literally light money on fire, and to allocate physical cash into a physical black box where anything could happen. Despite this structure Tinderbox Capital is uniquely unqualified to manage your money well and uniquely qualified to manage your money poorly.

Long the Wealth Effect

We admit that we doubted the zimbabweconomists who said “this will work, trust us, we’ve never been wrong theoretically,” but the wealth effect is working. We feel GREAT. More importantly, we feel rich. So much so that we are using a new word to describe our riches — wealth. And all that wealth burning a hole in our pocket? What’s a mini-baller to do? Spend spend spend spend spend. We are spending 5x more than we normally would thanks to our new permanently elevated levels of riches, our new so-called wealth. And that spending has beget job creation in the economy. Last week, feeling flush with nouveau wealth, I personally spent $40k to buy windows and $10k to hire homeless people to break those windows in a sort of informal mad-dash shopping-for-dollars-cum-breaking-windows competition. It was inspirational. This actually works — unemployment has never been lower according to current theory I think. The economy is growing at record levels (depending only on how you define these words: “economy,” “growing,” “record,” and “is”).

This wealth effect has radically changed how we evaluate investment opportunities. Never in my life would I have considered buying a CCC junk bond at 110 to yield 7% (quick ratings guide: BBB = investment grade, BB = fine company, B = either a fine or a sketchy company the ratings agencies have no clue which, CCC = this will default just give it a few years, D = this defaulted like we said when we rated it BB uhhhh we’re not good at this). Today? Shit, I’ll take it at a 6% yield. I mean my alternative is earning 0% on basically everything else. Plus I feel wealthy, isn’t this what wealth affected people do? Buy dumb shit?

The universe of potential investments has never looked larger. Anything that hasn’t had all the yield squeezed out of it is acceptable. And we do mean anything. Do you have any CLOs made out of REITs on offer (in all seriousness that doesn’t sound half bad)? Does Hollywood need any money to help make Mystery Men 2? Just send me whatever form I need to fill in, my permanent wealth is in.

Recommendation: Don’t hate the theory, hate the game. Long the Wealth Effect.

Long Mitt Romney

Things have never looked worse for Mitt Romney. We think they can only get better.

Since securing the Republican party’s mandate, Romney had hovered near a coin-flip to beat The Obama. Then Romney made the unfortunate mistake of personally insulting half the country in attempt to secure votes, an unconventional and seemingly unsuccessful strategy. Romney’s odds have subsequently cratered down to near 20% per Intrade, while FiveThirtyEight has him at less than 15%.

His performance in general suggests nothing more than a guy who wears laundry emblazoned with a big ol’ “R“, under which he has some sweet special pajamas. Romney has shown himself to be a phony suit who is bad at talking, an unfortunate status when running against a cynically empty suit who is good at talking. It’s easy to get caught up in the negatives of Romney’s candidacy and his situation.

As abstract value investors, we can’t help but look at the positives. Namely, Romney’s outstanding fundamentals: his strong chin, his fantastic hair, his above average height, and, most importantly, his maleness. The fundamental ratios are off the charts, no matter how you look at them. ChinHair:Age-35, Height:Avg Height, Trailing Acute Angles Outstanding, etc. The man seems like he should be the President. Seriously, look at him.

Recommendation: Long Romney. Investors in Romney’s Initial Presidential Offering bought in at a price of Likely President; the sell-side threw out consensus targets of Two-term President as soon as publishing began. That’s the past — those investors’ portfolios have so much red in them, they look like the punchline of a Kermit-in-a-blender joke. And it’s ridiculous to project that Romney will ever trade up to President. But his fundamentals are so strong that there is a floor in how badly he can trade; we still think he can bounce back to Yeah, You Can Kinda Imagine Him Having Been President.

Short the Humblebrag

While making out with Kate Upton last night, it hit me. I turned to KitKate, my name for her, and stared straight into her eyes.

“Baby, I just had an idea.”

Her eyes stared back, empty just like her head.

“Baby, my idea is really true.”

It was then that I realized that I hadn’t actually been staring at her eyes but at her breasts, her perfectly shaped, amply proportioned breasts, the ones I got to play with every single night — if I cared to. I turned my gaze upwards, towards her pretty little face.

“Baby, this humblebrag shit is really just a way for the user of the term to show his or her audience that they themselves are ‘cool’ enough to be up-to-date on hipster crap and memes — the tired act of labeling something a ‘humblebrag’ is itself a ‘humblebrag’ of sorts.”

She stared back, a gaze still empty just like her head, an empty head that now nodded in dumb consent. Then she fed me a hamburger which my buddy, Bobby Flay, had been preparing in my kitchen. I removed my hands from her breasts, their usual location on Tuesday nights like this, and walked towards the window, still chewing delicious bites of my buddy Bobby’s burgers.

I surveyed Central Park through the floor to ceiling windows, taking it all in. Behind me, Kate hadn’t moved, but her eyes now devoured the burger that remained half-eaten in her hand. I pulled out my iPhone 7SG, the one Steve Jobs left me in his will along with the words “Only you can follow in my footsteps, JD, take this future phone and change the world [by selling overstretched global consumers luxury phones that have a closed ecosystem which lock them into your company forever]”, and placed a call.

“Hey Gosling, what’s up. No, I’m here with Kate and Bobby. No, Upton not Beckinsale. It’s Tuesday, dude. Yeah, just chilling. How are things with you? Cool cool. So I was thinking, don’t you think this humblebrag shit is played out? Like it’s a weird obsession, because is it really a bad thing to humblebrag? Isn’t it preferable to humblebrag then to brag? Usually it’s just a way of being factual for someone who has a much better life than you, or even someone who had a marginally better situation happen to them than you. How else can you ever share any good news? Or anything that is cool? And the person calling out humblebrags is being hypocritical and douchey. Yeah, I knew you’d agree with me 100% Gosling — that is why we’re best friends, I guess, hunh? Anyways, good talk. I have to go finish the rest of Flay’s burger before Kate does. You know how Kate can get! Also, see you at Jay-Z’s white party next week. Ok, cool, later man.”

Recommendation: Short the Humblebrag. It’s been around for a year and it’s as tired as the Kanye meme. We’d be overweight the vanilla Brag, but we’re too busy racing each other in the flying cars we bought with the bonuses we paid ourselves from successfully raising Dangerous Fund II.

Dangerous Fund II

Tinderbox Capital LLC, an incendiary investment management firm and subsidiary of Long or Short Capital LLC, announces its second fund, Dangerous Fund II.

Dangerous Fund II will specialize in lighting money on fire. Tinderbox Capital will allocate physical cash into positions in which it will ignite. These positions will include the log cabin, the teepee, the lean-to, the obscene pile, the model bonfire, and the Scrooge McDuck. Tinderbox Capital’s due diligence process has consisted of earning merit badges in the arcane arts of fire-making at Camp Cedar, where the fund managers were also prepared for life in the real world by their indoctrination into Camp Cedar’s so-called “Color Wars.”

Tinderbox Spokesman Johnny Debacle:

“The investment management universe is inefficient at providing risk. We find this to be the case because the investment management universe is structurally obsessed with return. Our last fund, Dangerous Fund I, has performed very well, we think, losing so much money and doing so in such complicated fashion that it’s been difficult for us to calculate just how much it’s lost (rest assured, investors, you lost a lot and did so very riskily), so difficult that we may have just given up and started focusing on launching our new product, Dangerous Fund II. As an aside, our lifestyles are incredibly expensive, so expect the cadence of new products to increase and the quality of our management of old products to necessarily decrease. New products are where we make money, old products are those that we neglect.

We’ve learned several lessons from Dangerous Fund I, lessons we plan on incorporating into new products.

First, if your funds’ returns are improperly calculated because of complexity, sloth, or indifference, the investors are receiving another layer of risk on top of the risk they have in the underlying investment. This risk would be known in some circles as “Reporting Risk,” if those circles were dull and uninspired; since those circles aren’t square, that risk is known as “Nauditing Risk.” The creation of Nauditing Risk is something that can be marketed and sold. More on that later, probably in 2015.

Second, there is excess demand from investors for so-called “simple risk,” e.g. risk that generates no return whatsoever and does so with certainty. This is known in some circles as “The Keno Certainty Principle” or “Riskless Risk.” Dangerous Fund II is designed to mine this rich vein of risk appetite.

Dangerous Fund II will seek to disintermediate the middleman from the process of lighting money on fire by physically igniting investors’ dollars for them. It will generate the highest levels of Riskless Risk in the industry. It will charge a traditional 2 and 20 fee structure, which fees will be collected from the Five Year Fee Reserve, which reserve will be set aside whenever investors put money into Dangerous Fund II. See the prospectus for more details.

We know that young risk-seeking investors demand places to put their money to work, places where they can allocate $10,000 and potentially lose it all. This is the niche that Dangerous Fund I filled. But we also know that young risk-seeking investors demand places to put their money to work, places where they can allocated $10,000 and certainly lose it all. This is the niche that Dangerous Fund II will fill. We give you all the risk you will ever need and guarantee that we will either potentially or certainly lose it all. Dangerous Fund I and II will be appropriate for investors whose portfolios are overweight return and underweight risk and are thus seeking proper balance.

We just need your money to fuel our fires.”

Tinderbox Capital LLC is an investment firm that offers a focused set of investment products to a global institutional and high net worth client base. Tinderbox Capital LLC is currently structured to directly manage strategies in so-called “dangerous” trades and also to literally light money on fire. Despite this structure Tinderbox Capital is uniquely unqualified to manage your money well and uniquely qualified to manage your money poorly.

Ben Bernanke announces Quantitative Easy

Hi everybody. It’s me, Ben Bernanke. As many of you know, I’ve been extremely busy. During Quantitative Easing I and II, I’ve spent almost all of my time finding just the right amount of flation. This is very difficult for one person to do, but don’t worry — I have a calculator that helps me compute the perfect amount. Not sure it would be possible without my calculator; I can see why every other central banker in history couldn’t get it right and why all their systems ended in some sort of systemic catastrophe. Between my calculator and the advance of knowledge, monetary science is better understood at the present time than in those days of old.

But what hasn’t changed is how much people hate things being hard. I know I do. And in spending time with my calculator, furiously pushing her buttons, I realized that QE I and II were just too hard for me. And in receiving a deluge of explicit and implicit inquiries from the market about when QE would end, what would happen when it did end, why QE wasn’t just blowing bubbles for the sake of blowing bubbles, I realized that QE I and II were just too hard for you all, too. So I sat down and said to my calculator, “Calculator, markets are too hard. Let’s make them easy. Let’s help boost assets prices with a new program called, Quantitative Easy.” My calculator didn’t reply but I could tell from the light reflecting off her display that she loved the idea.

So here we go everyone. Quantitative Easy. I know there will be a rush of people asking questions, so let me answer some obvious ones for you now:

What is Quantitative Easy? Quantitative Easy will be a program run by me, Ben Bernanke, that will make asset prices go up. This in turn will lead people to be happy. It will get their juices flowing, their animal spirits will stir in their hearts, and they will buy things. If we all agree to buy things, even if we we can’t afford to, then everyone will get rich. Easy.

How will it work? Asset prices, all of them, will go up. Like I said: QE I and II were too hard, people were constantly trying to figure out which assets would go up and when. Worse, people were worried that asset prices might actually go down at some point. Crazy, I know. Quantitative Easy is going to be easy. Everything is going to go up. Forever.

What should I buy? A horse. A rainbow. Mykonos (which is for sale fyi). Netflix stock. A mansion in Vancouver. A 1987 Topps Mark McGwire card. A slightly used Japanese nuclear plant. US Treasuries. Portuguese bonds. The only limit is your own creativity.

How can the Fed afford to do this given its balance sheet? That’s a good question. Next question, please.

Where will the money come from? We have a very complex process, involving machinery and paper, too complex to get into here. Make it easy for yourself and don’t try to understand it. Just trust us.

This sounds to good to be true. Is there a catch? No. Would I lie to you?

Short Live-Action Penguins

Box Office Mojo has analysis on the filmic penguin market:

Despite its Liar Liar alienated father angle, Mr. Popper’s Penguins is shaping up to be a miss for Jim Carrey, who used to knock this kind of movie out of the park. The movie seems like an odd duck for June, and the live penguins aren’t as warm and inviting as other critters, anthropomorphized or otherwise. Animated penguins have had some success in Happy Feet and as supporting players in the Madagascar movies, but Surf’s Up wiped out in June 2007. Live-action penguins are untested outside of March of the Penguins, but Mr. Popper still is no Ace Ventura or Doctor Dolittle or even Evan Almighty.

Recommendation: Live-action penguins are “untested” so only those who can stomach not only the volatility, but the substantial downside risk are playing in those names. We’re short live-action penguins and underweight animated penguins. A catalyst for a change in our opinion would be the onset of another Ice Age or alternatively a substantial increase in the popularity of Italian Spiderman, the latter of which would result even more calls (e.g. demand) for pinguini.

Me-too shop BofA goes “Long-on-Women”

LoS has long been long-on-women ever since we learned that they were the only source for babies. According to years of research and field study, women have a de facto monopoly on having babies. And despite numerous damning letters we have sent outlining the grievous impact this monopoly has had and will continue to have on love markets, the FTC and other international regulatory bodies have shown no interest in taking any antitrust action against women. These agencies appear to be either corrupt or incompetent. Maybe, like the SEC, they are both.

Ultimately, we are not ideologues; we are handsome and incredible investors who lean towards real-world based pragmatism when investing our real fake dollars. And if you can’t break up a trust, you gotta go long it. We have been long women and their various body parts for years: ideas for “Pink Dollar” products for female drivers, long legs, short breast cancer (basically), short penis, playing the menstrual cycle, short girl-on-girl, sexual harassment arbitrage and probably most appropos, an analysis of high-end female assets. Hell, in a 2006 piece of research we did for MSFT, gratis, we exhorted the company to “change the packaging of [their products to appeal to women]“:

Change the packaging of your products. Very few women buy your products, Mr. Ballmer, and you are missing out on their money, or as we like to call it “the Pink Dollar.” You may assume that the key to attracting the Pink Dollar is to improve the content of your offering or to tailor your content to women. WRONG! Substance matters little to the average female. Focus instead on the superficial aspects. Make all your packaging pink, and have a little bow. They eat this crap up. Something that has worked for us on occasion is to put in a little note that says “Sorry.” You don’t have to specify what you are sorry for. It’s important to note that while it’s tempting to enclose a $100 bill, this will only insult and irritate the average female consumer.

A typical woman laughing because she is more valuable than menNet-net women are a fantastic investment (with the caveat that if the baby making monopoly is broken up or the cephalopods enslave the human race (2026 is our best estimate for the latter), multiples will come in substantially). So we do not begrudge the me-too boutique bank/research firm, Bank of America (NYSE: BAC), agreeing with our genius; we quibble instead with their failure to recognize and properly cite our genius. A sample of their report:

In continuing to focus on the “long-on-women” investment theme that explores the growing importance of female [assets], David Bianco, head of U.S. equity strategy research, said that [womenfolk’s illegal and terrible monopoly on baby production is]increasing discretionary income for women, which should benefit companies that sell specifically to women.

“Women may increasingly become the higher-income earners of U.S. households, and since they [tyrannically] make the bulk of household spending decisions as it is, we think their stronger purchasing power relative to men bodes well for spending on a wide range of categories from vacations to cosmetic procedures to home furnishings,” said Bianco.

Not a single mention of LoS or the other firms whose research they have cribbed.

Recommendation: Short BofA, for being bitches. Maintain long on women, for having all the power.

Important Caveats

When evaluating an investment in a new product, one whose markets had previously been thought to be so niche as to be theoretical, this is the kind of language that would make a savvy sophisticated investor feel longer:

[It] also seems like there will be a high likelihood of these vehicles making their way to high-end rental destinations.

Sounds great! Product X will almost definitely be better off if a rental infrastructure develops around it that allows the product to be consumed in small increments by people who otherwise wouldn’t be able to afford it. Think movies (back when they were $100+ to buy), or timeshares, or NetJets, or Netflix (NASDAQ: NFLX), or whatever it is that Rent-A-Center (NASDAQ: RCII) does for poor people, or the idea of…renting as a business model. It works.

But after I tell you that “Product X” is a jet pack (btw “Product X” is a jet pack, rad I know) I think it’s important to note that there is an important caveat in this whole “jet packs being bought by high-end rental firms” thing. Let’s read the unabridged portion of that quote (from this article):

Assuming the first few owners don’t die horribly, it also seems like there will be a high likelihood of these vehicles making their way to high-end rental destinations.

I have bolded the important caveat for the benefit of unsophisticated investors, as well as the Japanese. When evaluating a product’s feasibility in the market place, and the returns one hopes to generate from an investment in such a product, it is crucial to ascertain the percentage probability that the first few owners die horribly. I can’t stress enough how bad the first few owners dying horribly would be — I mean it would be horrible to your investment. So try and avoid that.

Advanced sophisticated investors may also try to map out the percentage probabilities that the last owners will die horribly (see “Segway, The”). If the last owners were to die horribly, it’s likely your investment’s value will similarly fall right off a cliff.


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