Long or Short Capital

Lately, we’ve witnessed a trend towards an increasing an amount of things being hailed as Contrary Indicators. Recent examples include the cover of the Economist (cover says “Wall Street: A Ten-Page Report on the Crisis), the Bearishness of analysts, our own Time Barrons Investing Thesis and the list goes on. Here’s a news flash — almost nothing is actually a contrarian indicator. That’s right. Easy to assume, difficult to prove. Most things are just noise. Just preemptively, here is a list of things that are not contrarian indicators.

• Everyone saying it’s a bottom
• Everyone saying it’s a top
• Everyone saying they’re a top
• The fact that the Democratic party has been labeled a shoe-in to win the Presidency
• A comet hitting the earth (“time to go long solar energy!”…idiot)
• The US winning a Gold in Karate Chops at the Olympic Games this summer
• Everyone agreeing that dragons really do/did exist
• And lastly, everyone thinking that we are not at risk from squids (we invest in squids on their fundamental merit, not because they are a contrarian play)

We thought it might be helpful to our readers and subscribers to review the collateral that currently underpins some of Bear Stearns “assets”.

Doesn’t look bad from far away. Definitely some promise. Let’s get a closer look.

Again not so bad, am I right? This whole thing is overblown.

Does anyone know Russian? Looks like a friendly welcoming sign that points out that they want YOU to come into their town.

A ferris wheel! Fun! And conveniently located next to the 3HEPEAMUK building.

A little landscaping, some paint, a geiger counter or two…

Our earlier research, Are Walruses Efficient, seemed to indicated that the walrus knows how to get it done, without actually having to do much of anything. This video is further testament to their greatness — Dancing Walrus. All it takes is a few good dance moves, and a walrus can go cross-species and pull any human tail he wants.

Recommendation: Walruses are emerging as a potential threat to Squid Hegemony. Were recent efforts to cross-breed Walruses and Cameles into Walmelruses are successful, we would revise our rating on Squids while a downgrade of the Human species would be inevitable.

HT to TQ

Good afternoon.

As some of you may know, I’m Eliot Spitzer, and I’m a big deal in this city, the fine city of New York. I’m also a big deal in the state that bears the same name. Let me first state that I will not address whether the smirk on my face is or is not, depending on what the definition of “is” is”, related to anything going on below your viewline at the podium.

As you can see from my hand gesture, I was involved in a prostitution ring. No this is not how I actually got “involved with” the prostitution ring nor how I held my…gavel.

Regardless of whether I was merely a participant, the ring-leader or a prostitute, I hope that you, the public, will not let this stand in the way of my role of making New York the best state in the union. I hope to assuage any fears or concerns as to my involvement by giving you the facts of the matter.

Let’s get to it.

This is how big I was…to the prostitution ring. Yes I was closing down other prostitution rings while frequenting this prostituion ring, but I assure you this is normal for attorney generals. It’s standard operating procedure.

This woman was in the ring. Julia’s a university student who the Emperor Club rated as “three diamonds” out of “six diamonds.” Great girl.

This woman was not in the ring.

This woman was definitely not in the ring. I fuckin’ swear it.

For a fee, they’d let you touch it.

For a larger fee, they’d let you juggle it. Sometimes a motor-boat would be included gratis.

This was one of my favorite positions. As you can see, you have a lot of control and a full view of the landscape. Sometimes I’d lay a little slap on either side, firm but fair, just to let them know who the law was. This cost $5,500 per hour.

Uhh, so uhh as you can, uhh no big deal, uhh right, hahahah…ha…ha?

My wife is staring at me, isn’t she. Who brought HER here?

Hmmmmm.

(Eliot, you must think of a plan to save your job)

If children still endorse me, sweet adorable innocent children, then I clearly cannot be so bad. Clearly.

You told me that would work. Asshole.

Uhhh…..

Zimbabwe continues to get it. When facing simple, but large, macro problems, the country shines like no other. The biggest problem with with supply and demand is that sometimes the demand cannot afford the supply. Zimbabwenomical solution? Enact policies consistent with Mugabe Efficiency Theory which lower the price of supply to make it affordable. The country is faced with rampant poverty and lack of wealth. Zimbabwenomical solution? Mugabe has taken it upon himself to make the entire country full of millionaires, an unprecedented accomplishment, not only in Africa but in the whole world. From a CNN article on the Zimbabwean dollar

Money traders in [the] African country say the Zimbabwe currency has [surged] to a record [of] 25 million for a single U.S. dollar.

It’s a race between the US and Zimbabwe, one the latter is clearly, and as a US citizen disappointingly, winning.

Later in the same piece we spotted evidence of another advance in the field of Zimbabwenomics:

[The] regional breadbasket [imports] canned and processed foods, household goods, soap, toothpaste, toiletries and other items [from] neighbors Malawi, South Africa and Zambia and from as far afield as Egypt, Germany, Iran and Malaysia.

Zimbabwe is not only reaping the benefits of trade by engaging in a diverse set of trading partners, but it’s taken a figment of its own imagination, and profited from it, by trading with a fictional country in Malawi. Zimbabwe’s move is particularly bold in that Malawi doesn’t even sound like a real country, more like someone with an oversized tongue trying to say “mara, way!”. The key benefit to trading with a fictional country is that you control the terms and have all the leverage because, in order to continue to exist, they are dependent on you believing that they exist. This is why the US is able to extract such generous terms in its trade with Canada.

Recommendation: Zimbabwe is on the very cutting edge of progressive thinking; we would buy the whole country if we could. Actually, according to our trader, apparently we now can. Amazing.

According to the un-Fed, inflation is rampant in the US, where the cost to fill the average tank of gas is close to the price of taking a family of four hundred to see Hannah Montana 3-D. It is becoming clear that this inflation is not contained within the US, western hemisphere or even the land-based area of Earth. It has spread to the waters that lap up to our financially underwater beach properties — the underwater world. This CNN story outlines how inflation in octopus leg costs has literally crippled an octopus, making him into a hexapus.

British marine experts have found what they claim is a world first — a six-legged octopus, or “hexapus,” whom they have christened Henry
…
Octopuses are renowned for having three hearts and blue blood, but not usually six legs.

While this is only anecdotal evidence it is startling; Henry isn’t even a lower class octopus who would always be scrimping and saving to fund his legs and would be the first to feel the impacts of inflation. Henry is actually a blue-blood british octopus, who should have no problems sourcing legs in any part of the cycle, absent some sort of hyper-inflation. We can only speculate that Joe Octopus is now Joe Pentapus or Joe Quadapus.

Recommendation: Octopuses are a large component of the cephalopod index, but a less crucial part of the squid world domination investment thesis that we have outlined in the past. There are no measurable signs that the squid economy is being impacted by inflationary headwinds, but we have been and will monitor the deep sea situation with our ROV Longus or Submersibilius which has been launched from Juggles’ mega-yacht currently moored in the Indian Ocean. We continue to be long the greater cephalopod index; a catalyst for revising our opinion would be evidence that the average squid is no longer able to afford a razor sharp beak.

HT to reader Lumpen

Compare and contrast these two pieces of analysis:

The Customer Service Elite (scroll to #19)

“Smith Barney, Why do you hate your customers?” A Play by JD

Notice how one has fancy pants charts, fabricated statistics and a penchant for speaking untruths, while the other tells of the plights of the common man, in play form no less.

Recommendation: We’d short Businessweek but as far as we can tell there aren’t any shares left to borrow.

HT to Anal_yst

Ben Bernanke’s speechwriter’s first draft for a Monday morning pre-market open speech.

Good morning. There has been quite some concern about the general economic outlook of America. There also has been quite some concern about the existence of inflation. We will ignore the latter for the time being, at least until Zimbabwenomics is better understood and appreciated by the public. Let’s focus on the general economic outlook, and by that, I mean the stock market.

If we let Friday exist, it will distort comparisons with prior years and also it meant that markets went down a lot. And to that I say, not on my watch, sir, not on my watch. So expect all your portfolios and investments to be reset to their close of business Thursday values very soon. And remember, who loves you? I do. Thank you.

Direct quote from a CFA study guide book:

The primary factor leading to overconfidence in professionals is knowledge (education or experience) which leads them to think they know more than they think they do[.]

Those italics are from the book, not from us.

Take Away for the CFA Candidate: In order to get a CFA, one must keep in mind that knowledge, specifically derived from education or experience, is bad.

Recommendation: Short me, dude, short me right in the face.

Social protocol (you know, that thing that old people love because it reminds them of the golden years when things like disenfranchisement of the underclasses and of the other gender was reality rather than just a dream) says for the first anniversary that the appropriate gift is “Paper”. And it is “Paper” that Long or Short Capital suggests as the most appropriate fix for your first monoline bailout. Paper as in “Let us paper over this problem, our problem, together”.

Yes, yes, maybe the monoline says she wants or even needs something more flashy, like diamonds, platinum or several flatbed trucks topped up with gold bullion to firm up her capital with several trillions dollars of obligations looming. But you have to make sure your relationship with the monoline is real and you don’t want to blow too much of your money on this fix. If you give her too much up front, maybe things will still fall apart and the only thing you’re left with is a ton of exposure and a view down the ravine. If you give her too little, yeah maybe she leaves you for Mr. Muni, but you retain some of your capital and most of your pride. You know her ex is still a huge part of her life; the stable Mr. Muni is someone she sees everyday and has been part of her life forever. He will always be an attractive option which is why you is it so imperative that you keep your monoline on a short leash.

Paper is the perfect fix for this purpose. It says “I love you, and yes, I believe in you, us, WE, a little bit, but let’s not kid ourselves and think this is anything more than a veiled attempt to hide our dysfunction behind the walls of convention”.

I have a competition in me. I want no one else to succeed. I hate most people…There are times when I look at people and I see nothing worth liking. I want to earn enough money that I can get away from everyone…I see the worst in people. I don’t need to look past seeing them to get all I need. I’ve built my hatreds up over the years, little by little, Henry… to have you here gives me a second breath. I can’t keep doing this on my own with these… people.
-Daniel Plainview in There Will Be Blood

Past Quotes Entirely Relevant to Investing

Last year, we highlighted the deleterious effect on shareholders’ value of having a nerd as CEO of a publicly traded company. The case we presented was Sharper Image (NYSE: SHRP) and we recommended a buy based on the fact that the company should rise to its nerd-free valuation of $20 per share.

In light of the fact that the company’s stock has now fallen a further 95% from its former levels and the company today filed for bankruptcy, we are updating our models to appropriately reflect the lingering effects that the taint of a nerd leaves on a company. Previously, we believed that this taint would not present a hairy problem and that it was a problem that would easily be excised. In this we were mistaken — the taint of a nerd CEO runs deeper and darker than even we could have anticipated.

Recommendation: We maintain our position that there is an activist shareholder opportunity in finding companies whose CEOs are avid LARPers or who live in an exact replica of the Borg’s ship. We effectively tweaked our model such that the previous implied taint lag is 40% longer and we have great confidence in using it to invest your money.

Valentine was a saint by some accounts. By other more masculine accounts, Valentine was a cruel master, only interested in ensuring that men were immured in love. At this, Valentine was a complete success. He built his day to be the perfect prison, the Alcatraz of holidays.

Some relationship-ensnared men have tried to escape, oh yes, they have tried. Every attempt has led to either a drowning in the cool rivers of Nosex or a plunging to the steeped tips of Shivintheribwhilesleeping. As your advisor, as someone who is paid to be smarter than you, and most importantly (but least sincerely), as your friend, we implore you not to try to escape. Your best bet is to give in, to roll over and focus on surviving.

Survival requires one thing — buying your girlfriend one of the following: flowers or chocolates or shiny shit. Again, as your advisor and friend, we have helped you out and provided below a handy link to the VERY best supplier of flowers and chocolates in the whole world, FTD.com. Please, for your own sake, not for ours in any way, click the link below and buy something for your girlfriend before you find your lungs suffuse with the frigid waters of the river Nosex.

From seed capital of ramen noodles and smarts, Google (NASDAQ: GOOG) now stands on the brink of world domination. How has Google done it? A lot of people think it’s because of their search engine technology, or their system for contextual advertising, or their collection of smarts, or their corporate ethos. But sometimes the answer is a pair of OO staring you right in the face. Google’s performance has been determined by the 2nd and 3rd letters in it’s name, the prominance and potency of its OO factor.

Let’s do a little history of the search engine space; first, coming out of the primordial ooze of the 80’s and 90’s there were many, mostly those who could barely walk (Altavista, AskJeeves, other crap) and amongst them, Yahoo (NASDAQ: YHOO) rose. And who could defeat the incumbent and its OO? Google, a company who knew that they couldn’t put the OO in the caboose. If they wanted to take down the champ, they had to knock him out. So they put the OO right in the middle and the rest is history.

Look at the social networking space. Friendster gave way to MySpace, a beast many thought to be unstoppable –> until Facebook rose to power. There have been hundreds of videosites, none that crushed the others, until a double dose of phonic OO from Youtube. Similar thing occurred with Bluetooth and wireless standards. And HD-DVD? Didn’t have a chance against Blu-Ray.

Why did Microsoft (NASDAQ: MSFT) pay so much for Yahoo in their contemplated acquisition? Clearly, the OO premium. There isn’t much of it out there, so when OO assets are available, they get bid up.

Recommendation: We chastise people who try and make things too simple, but in this case, it IS that simple. OO assets outperform OOless assets. Expect Web 2.0 to be surpassed by the Web 2.OO.