Long or Short Capital

This report on seals has us further concerned about the prospects of the entire species.

After 45 minutes the seal gave up, swam into the water and then completely ignored the bird it had just assaulted, the scientists report.

Walruses are models of efficiency. Can you see a walrus ignoring a bird it assaulted? Or do you think he’d make sure the assault was properly finished and the bird either consumed or appropriately stored for later consumption at his Balrus pad?

But the scientists who photographed the event speculate that it was the behaviour of a frustrated, sexually inexperienced young male seal.

Again, a walrus is a model of efficiency. Can you see a walrus doing this, or more apt, a walrus not getting his balrussing on regardless of his experience level? When your species specializes in getting it done, there is never any frustration. There are also no excuses. This is the code they live by.

Recommendation: There is a reason that the movie Andre sucked, and it wasn’t due to the all-star human cast, or the incredible cinematography or the director who shares the same name of the director of Mad Max, but is not actually the director of Mad Max. Hell, you can’t even blame Maine (in this case). No, the problem with that movie was that it wasn’t called Rufus, and wasn’t centered around a walrus with the same name. That movie would have won critical acclaim and probably been so good that just having seen it would get you laid. Additionally, we can’t see seals being a credible species in the context of Global Squidding. Short the seal.

HT to girl

When America had the desire to prop up corn prices a need for cheap sugar what did it do? Make sugar out of corn.

When America had the desire to prop up corn prices a need for an alternative source for cheap liquid gasoline? Make gasoline (ethanol) out of corn (and out of pigs via piganol).

Now America has a floundering real estate market and the need for cheap domestic financing to prop it up. What should she do? Make mortgages out of corn. Turn what is plentiful into what is scarce. Simple.

Corngages can be produced by converting corn into cheap financing by a special process invented by Orville Redenbanker. The best part is that it is a green friendly and renewable source of mortgages, an important point in a world where sustainability is stepping to the forefront. While there are some side effects (including but not limited to: a large amount of emissions which melt the ozone and an increased price of corn, which means an increased price of everything for which corn is an input or a substitute), they can be “offset” by employing other corn products such as cornbon-offset and corn price deflators.

Recommendation: We recommend being long corn, long real estate and long any problem which can be solved by corn, which as far as we can determine is EVERY problem.

A lot of banks have a lot of bad paper in many different forms. Some of it is from ill-advised and underwritten LBOs which top-ticked the buyout market. Some of it is from complicated structured products based on real estate, bank loans, student loans, what have you. Some of it is even financing used to fund a chain of off-balance sheet restaurants to serve the growing off-balance sheet community (as many of you know, this is a space currently under served with respect to basic amenities, more on this in the future).

Regardless, due to the current credit crunch crisis banks are very desirous of (read: being forced to find) a way to unload a lot of debt from their balance sheet. But where to put it? Off-balance sheet locations are coming under increasing scrutiny whether they come in the form of SIVs, super-SIVs, of ultra-megawide–thisonewillwork-SIVs. Under the carpet is where they keep the trillions of derivative exposure, so there’s no room there. If only there was a way to OUTSOURCE the off-balance sheet.

And now there is. The latest credit product is the new OFF-off-balance sheet provided by Private Equity Shop Y and Hedge Fund X (as seen on the internet). In exchange for below market financing, loose structural terms, and a 10-20% down payment, the off-off-balance sheet structure is designed to take an undiversified smorgasborg of the bank’s very own hung deals fresh from the bank’s books. The banks liked it so much, they underwrote it at par, so it must be a steal at 89!

Recommendation: Being that off-off is a double negative, we think that maybe, just maybe, that selling loan assets to highly leveraged entities to which you provide the financing is more of a shell game than a credible solution.

Haha, gotcha! That’s crazy talk, this time it’s different. Between the new Citibank (NYSE: C) reality distortion field and the new non-SAAP acounting measure Earning Before Everything, the bottom has been put in.

Wooo!!! Business drunk! More business juice please!
-Liz Lemon on 30 Rock

Past Quotes Entirely Relevant to Investing

Many companies provide an EBITDA figure along with their earnings, and they let you know it’s a non-GAAP measure, because, well, it’s a non-GAAP measure. Like Skittles, EBITDA comes in a rainbow of fruity flavors: adjusted EBITDA, EBITDAR, EBITDAM, EBITA, EBITDARP, EBITDARM, EBITDARPO, EBITDO and when times get really bad REBITDA.

We think there is an ample opportunity for the introduction of a new non-SAAP measure, one we call EBE or Earnings Before Everything. Let’s cut to the chase, let’s not dicker around, people use EBITDA as a proxy for free cash flow but management wants to use it as a way to inflate the appearance of a company’s health and what better way to do that than EBE? Add-back whatever you want, add it all back, even stuff the firm has nothing to do with. How much did the Chunnel cost? $100 billion? Add that back. Katrina cost a lot too. Add that back. That earthquake in Pakistan or Mexico or wherever? Add that back. Did you donate to charity? Add it back. Did you write something down? Add it back. Did you write something up? Use your discretion to not back that out.

Recommendation: Whenever I see EBITDAM, I say it in my mind like someone who is really surprised at EBIT. Like “EBIT, DAMN, those results are amazing!” or “EBIT-DAM! Cash flow is king!”

We are conducting some research, which we plan to analyze rigorously, produce a model from which to profit, front-run the publication of such a model and then, lastly, publish said model.

Please, answer these questions in the comments section

Favorite Candy when you were
6 years old:
16 years old:
26 years old:
And (if you are older than 30) today:

Thank you for your time.

Citigroup (NYSE: C) announced first quarter fiscal earnings. The results were incredibly good and the stock has subsequently surged almost 10%. WSJ article on Citi’s Q1 release:

The loss of $5.11 billion, or $1.02 a share, was deeper than Wall Street had expected and took the bank’s total loss over the past two quarters to nearly $15 billion.

…

Citigroup’s first-quarter revenue plunged 48% to $13.22 billion amid the write-downs. Analysts polled by Thomson Financial had expected a loss of 95 cents a share on revenue of $12.77 billion. A year ago, Citigroup reported net income of $5.01 billion.

They also announced, via brain-wave subversion transmitters, that they have developed a Reality Distortion Field, a device long-rumored to have been in the possession of Steve Jobs but which has only actually been developed and effectively utilized by Citi.

Recommendation: If you can get the financing to buy a large truck, which may be difficult since no banks are lending money to anyone at the moment (but don’t worry, their future results will still be killer because the business of banks is not actually the loaning of money to people and stocks don’t consist solely of a company’s future earnings), we recommend backing that truck right up to the biggest pile of Citi stock you can find. The Write-Down Rally has been one-upped by the Write-Down AND Miss Expectations Rally.

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.

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

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.

Pattern recognition and memorization is key…If you do not know the next pattern coming up in a Tron Light Cycle Event…You will lose your life.
-Robert Mruczek in King of Kong

Past Quotes Entirely Relevant to Investing

The movie 21. Normally I don’t care when they do true-story things and take a little poetic license and what have you. Fine, whatever, add a spice of glamor, a touch of Hollywood and tighten reality to make it snappy. But in the case of 21, they made a needless racist edit to the story. The real life MIT blackjack team was mostly asian and middle eastern, and the main guy, Jeff Ma, was asian (he later started PROTRADE). In the movie version, the lead is some banal young white “star” and Kate Bosworth. If an asian dude can’t be the star of a movie about going to MIT by day and counting cards by night…what exactly can he be in except for a kung fu movie? Not to go Stossel, but GIVE ME A BREAK.

Recommendation: Additionally, after almost 20 years of Real World and Road Rules, and several hundred cast members, not one has been an asian guy. Not a single one. Look it up. Surely there are other cool acceptable asian dudes out there in the vain of Bruce Lee and Paul Kariya’s dad!