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Math Too Hard: Qualitative Easing a Literal No-Brainer

Unfortunately it seems that, when we recommended Quantitative Easy, even though it was super easy, it didn’t gain a lot of traction. The markets haven’t been nearly as easy as Ben had hoped. So we here at LoS went back to the blackboard for a new idea, something on which we could write a clean, articulate white paper.

(Aside: yes we have a BLACKboard. Funny story because see last election cycle we realized that voting for Obama was a sweet get out of racism card, like buying carbon offsets so you feel ok about how much “damage” you do every time you fly in a plane, and while this came in very handy as a guilt hedge, based on his performance we don’t think we can vote for him again, plus it wont be nearly as “urban cool” to vote for a candidate with the slogan “Change, Again, Seriously.” So we thought, what else could we do to show cultural diversity? And we came up with installing a blackboard as the most obvious answer.)

After furious sessions, much chalkyness and vigorous eraser banging, what did we come up with? Qualitative Easing. As mentioned in our last Easy piece math is hard, almost as hard as lifting weights (which are VERY heavy by the way, just found this out). But Ben, the Bernank, is a hard man, capable of bearing an Atlassian load without so much as a shrug.

Qualitative Easing will have no math (rejoice!), it will just be a touchy, feely, sensual qualitative description of how the Bernank is going to increase prices for things that you OWN (stocks, bonds, homes) and keep prices the same for things you BUY a lot (gas, food, chia pets, viagra, tickets to Japanese hologram concerts).

Assuming he accepts my draft of his Qualitative Easing announcement speech (practically a fait accompli), it would go something like this:


Dear Americans,

I, the Bernank, am going to buy all of your assets from you at much higher prices and, like a hot shower with mango body wash, it is going to feel so good for both of us. I know you’re worried about the fact that the cost of everything is going up more than your income, but worry not: it is always darkest before dawn, and a beautiful dawn it will be with the prices of all the things you want to be more valuable growing like the rising hot solar star in space that we call the sun. Simultaneously, congruently, and coincidentally, the price of everything you want to be lower will fall like the delicate summer rain which wets the earth and promulgates the freshest of smells: moisty asphalt.

My warmest and kindest and biggest love to you,
Ben Bernanke


Let’s Talk About Health, baby

Let’s talk about all the good things and the bad things that may be. Recently, everytime I’m at Blockbuster video (NYSE: BBI) or waiting in line for a payphone or getting my chest hair lasered (ask your depillitator for “the Kaiser”, your lady will be grateful) I’ve been getting dragged into the healthcare debate. Usually I just pretend I’m on Total Request Live:

Carson! I think Obamacare {QUICK DEEP BREATH} by Barrack Obama {QUICK DEEP BREATH}) should be the number 1 video because Barrack is soooooo hotttt and everyone should have should have rad healthcare and it should cost way less and Obama rocks my world!!!! WOOOOO!!!!!

If however you actually want to waste your time arguing about healthcare we thought we’d take a few things we commonly hear and give you some IN YOUR FACE FACTS to drop on your friends and make them hate you more than if you just make outrageous claims that you can’t back-up. Mostly what’s below is true, mostly, and if that standard is good enough for science and math, it’s good enough for us.

People say: For-profit health insurance companies are the devil and the reason we spend so much more on healthcare than other countries (Note: this is a recurring theme of the hot selling book “Healing of Amercia” by T.R. Reid, now available at your local grocery store).

IN YOUR FACE FACT: Healthcare insurance companies make between 5 and 10% profit margins (p.5). So even if you usurped all these profits (assuming you could run the companies just as efficiently) the most you could save is 5-10% of the cost. And by the way many states already have not-for-profit Blue Cross Blue Shield plans. If not making profits made insurance companies give you the same care at lower costs then these BCBS plans would be blowing up like a totally sweet Jenna Haze automatic blow-up doll. But they’re not, they’re slowly deflating like blow-up dolls tend to when you make them wear a spiked choker against their will. Mostly.


Wait wait, we got HALF???

Art is truth and should never be censored Executive pay and Wall Street bonuses are the root of all evil.   You might even put them in the axis of evil.   And our fearless good-guy government leaders in the US and Europe have addressed the evil head-on, chastising anyone who makes “a lot of puddin“.  Recently, even going so far as to enforce pay freezes and caps.  This might sound suspiciously socialist, even Russian.

Unfortunately someone forgot to tell the government that they were getting half those bonuses in taxes .  Yes, The Government, you get a 50% cut of all that bonus money. To which I say “THE GOVERNMENT, HOW DARE YOU ACCEPT SUCH EXORBITANT PAY! YOU ARE RECKLESS!  AND YOU DIDNT EVEN SAVE ANY OF IT???  DISGUSTING”. And WHOOPS The Government, you just capped your own tax income.  And in places like the UK, where financial services tax income is 25% of the budget, it’s going to mean that you, The Government, will have to lever up (read: print money) to make up the short fall.

Banks won’t lever up.  They have decided that lending isn’t a good return on investment right now.  But most banks have decided that adding some leverage to pay their top performers bonuses in an awful market is a good return on investment.  The Government has decided the opposite.  Of course, the Government is the same body that thought that THEY, career politicians of varied backgrounds, could do a whole lot better allocating mortgage resources than the free market via the mandates they put in place for Fannie Mae and Freddie Mac.

For one side when they do a bad job, their firms and their entire industry end up on the brink of non-existence. For the other side when they do a bad job or are completely wrong, whether it be 9/11, Iraq, aiding the Great Regression, printing money or messing up the recovery, they get much MORE money and much MORE power. If Dick Fuld had worked for congress, he would have been promoted to Chairman of the House Financial Services Committee.

If the Government does follow through all the way and take away or freeze bonuses for Wall Street executives, we think it’s only fair that they should also give something back to those very same Wall Street executives. I have some suggestions.

  • A cut of every lobbying dollar that politicians get after leaving public office
  • A cut of every speaking fee politicians receive after leaving public office
  • The ability to travel on a whim at the expense of taxpayers, specifically in support of potential new employment
  • A new requirement that poor performance is rewarded with promotions and tenure, whereas in finance in the past those things were rewarded with being fired or a dramatic reduction in bonuses
  • The ability, once in an executive position, to “redistrict” your supervisors in a way that ensures that you have supervisors who are most likely to favor you with continued employment
  • And last, but not least, coupons for Washington DC’s high end brothels which are rumored to be the nicest on the East Coast

The Palm Pre – It’s What Happens to Your Body When You’re Too Excited

As you may have heard, Palm has launched a new phone.  The launch has Wall Street in a frenzied state of excitation, a state of such frenzy that Palm (NASDAQ: PALM) has “doubled in size” in the last two days.  I think we’ve all been excited by “new palms” before.  But this one is special, it’s the first phone to actually be named after the baby-making fluid which biologically signifies you are really sloppily excited about something.

Recommendation: In our experience the presence of ‘pre’ usually means you are too excited/optimistic about whatever you think is going to happen. In layman’s terms, it means you messed up, usually literally, before you even got down to your business. We stick to our long term fundamental thesis of Sell the foreplay (which usually disappoints), and Buy the afterglow. Here is a video of the pre in action.


Bailing Out the Bailer-Outer

Today the US treasury announced they are bailing out the federal reserve bank. They are concerned that the federal reserve bank – after taking over the debt of Bear Stearns, Fannie, Freddie, AIG et al. is “over-leveraged”.  The obvious question is, who will bail out the Treasury?  The answer is paper.  More specifically the “Bureau of Engraving and Printing”.  We are so long the Bureau of Engraving and Printing as we see it as the only financial institution in the country that will always “find” enough liquidity to fund itself.  If you’d like to get long them we recommend you check out www.moneyfactory.gov.  Yes that’s the real name of their government website.  Money doesn’t grow on trees, but you can cut the trees down send them to a money factory and presto pronto prego DINERO!

Recommendation: In any mania, don’t invest in the company that mines the “gold”, buy the company that supplies the “shovels” and “picks”.


How Are Oil Prices Affecting You?

Sorry honey, I'm so hungry I feel totally asexualInspired by this incredible expose about oil prices hurting kids via increasing operating costs of school buses all over the country, we decided to survey other demographic representatives to see how higher oil is affecting them.

Middle-aged white woman in the midwest: “Gas prices are so crazy I had to buy a second car, one for when gas is cheap and one for when gas is expensive. But sometimes I drive the wrong one just to be bad, I’m a naughty girl on the inside, I go wild!”

A London debutante: “12 months ago it was so posh to be shagging a banker, but now I can’t be bothered if he doesn’t come from oil money. Russians, Iranians, MAYBE a Norwegian – but only if he has that Viking look. Also unrefined crude oil makes for great lube – it’s so hot when they put it on you, and the fact that it’s getting more expensive and they still just keep using a lot of it- that only makes it hotter and shows they care about you.”

A common dragon on the street: *FIRE!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!*

A baby: “You would be alarmed at the rate of inflation I’m seeing in breast milk. Most people wouldn’t believe it but the persistently rising crude oil price has a direct impact on mommy juice. I estimate 2% of the input costs for breast milk are oil and oil related products. How do you think mommy makes milk? She gets in her car, goes to Olive Garden and eats pasta, you can’t walk to Olive Garden, you can’t crawl either — I know, because I tried. Shit’s like an ultramarathon of crawling, and with my job, my kids and the commute, I don’t have the baby-time to be in that kind of baby-shape.”

That oil-eating bacteria (which may or may not exist): “I don’t think you understand how hungry I am and what it takes to feed a family of four oil-eating bacteria. I’ve lost thousands of micrograms and my entire asexual family, also known as me and those who are indentical to me on a cellular level, we are all doing horribly. But boy does Gail (who is also me (this is getting meta-creepy)) look fabulous in her skimpy bacteria-lingerie! The government always says it will stand up for the little guy, but apparently this little guy is too little. Vote Obamoeba!”

Please tell us how oil is changing your life.


What Are Investment Banks and Financial Companies Worth?

8. That’s it. 8. They are all worth 8.

All financials stocks are worth 8. (Fast forward to minute 6 or so, it all will become clear by minute 7)

Recommendation: If a financial stock is above 8, short it until it is 8. If it is below 8, maintain a buy until it is at 8.


Bloomberg News Writers are Boobs, The Bad Kind

Notice to Bloomberg headline writers — contorting your headlines and story to changes in stock price of a company makes you look like a gaggle of maroons. My example from last week:

2:15am – (BN) Electrolux stock futures drop
2:17am – (BN) Elextrolux profit falls, steel costs squeeze margins
2:36am – (BN) Electrolux’s latest profit proves future is dimming
3:00am – ELUXB.SS opens up 6% – whoops we had the wrong angle I guess
4:00am – (BN) Electrolux advances after fourth-quarter profit rises 22%, beats estimates (our emphasis)

Apparently between 2:15am and 4:00am Electrolux’s reported 4Q profit went from “falls” to “rises”.

Recommendation: Terrible reporters, please stop looking at the stock price and then writing a story to fit it. Also, please stop being so terrible, at least until I establish a large short position in you.


Africa is good at doing things

In case you’ve been on the moon, South Africa is out of power. One government-run monopoly produces 95% of the country’s power and they ran out. In 1998, the power company told everyone in the government that they would run out of power in 2007. The government apparently thought they were just kidding and didn’t do a damn thing. So now they’re out. In light (swish!) of this, let’s examine the key points in the investment case for going long South Africa.

1) They have a 25% unemployment rate; sounds bad but the biggest driver of the economy — the mining industry — is booming and will create jobs

2) Oh wait, you need a lot of electricity to mine and smelt metal, no one will spend the billions needed to build a new mine if they can’t get secure power to run the facility. At least there’s some positive political news….

3) The soon-to-be president, who goes by “JZ”, clearly gets it and will fix everything:

“He [Zuma] was acquitted last year of raping an AIDS activist. He testified in his trial that he had consensual sex with the activist, who is HIV-positive, without a condom, but he showered afterward to minimize his chance of contracting AIDS.”

This guy was Chairman of the National AIDS Council in the country with the biggest AIDS problem in the world and he thinks “washing it off” stops AIDS? Really? Don’t you at least have to put some ‘tussin on it?

Recommendation: Don’t analyze South Africa, it’s depressing.


Quotes Irrelevant to Investing

“The currency is the share price of a country.”
-George Glynos, Econometric Treasury Management


Who Missed Their Earnings?

Is this a company that missed earnings or the index of the largest country in Europe?


How to End It

So your fund is down double-digits, the first number is a 1 if you’re lucky, and you are one more -3% day away from getting a margin call from your friendly brokerage house which has it’s own balance sheet disaster because of its in-house, levered long ‘hedge’ fund. You’re starting to think it’s just not worth it anymore and that the easiest, quickest way out is just to end it.  Put yourself out of this misery and give your wife/kids/fellow mini-ballers the insurance check they deserve. But you have to ask yourself: Do you really want to go out the easy, painless way? You’ve lived your whole life as a flashy, jet-set, new money rock star and you should go out with similar flair. Our top ideas for how to end it with a flourish that says “I was here and I got IT done”:

  1. Tie a Bloomberg screen to your chest and fight a bull ’til the death. If the markets get worse it’ll see red and you’re toast; if we bounce then you’re saved and you could say you fought a bull with nothing but a Bloomberg terminal and won. HUZZAH! Plus there’s symbolism if you die by bull, I’m not sure what it symbolizes but it’s highly symbolic.
  2. Chain yourself and a woodpecker to your desk. Train the woodpecker to peck the sh-t out of you every time he hears the words “we’re selling off” from your trader. This is advantageous because woodpeckers can’t be prosecuted for murder in most states (IANAL).
  3. Put a gun in the ear piece of your phone. Then do an update call with a highly cyclical company that has consumer exposure and oil as a big cost (like I don’t know, an airline) and every time the retard IR guy tells you “we haven’t seen any weakening in demand yet” shoot yourself in the head. Extra points if you figure out how to get the gun connected to your wireless earpiece via Bluetooth.
  4. Make a list of all the shorts you pitched in the last year. For every one that is down more than 20% from where you pitched it pull out one hair (if you are bald – go pubic). When you run out of hair scream and jump out your window.
  5. Tell your mom if she calls you one more time and says “every time I read about the markets going down I think of you, are you doing ok?” that you are going to put an ice pick through your eye. Then buy an ice pick and wait for her to call you.
  6. Apply online for an associate job at an investment bank. Believe it or not this will kill you, guaranteed.

Totally Rad Mini-baller Ski Lingo

A few mini-ballers went skiing over break and met some stoners in the gondola who taught them all some coloradical ski lingo. Of course the mini-ballers were enthralled with this new vocabulary and proceeded to overdose on the new found choices piece of diction. A brief guide in case you want to “make some convo” on the lift this year.

Shred the gnar – ski/ride in a totally sweet way. “Yo bra, we shredding the gnar today or what?” (can also use “shred the gnar-gnar” for additional emphasis on how much gnar you intend to shred)

Gnar-buckets (n.) – the receptacle for the gnar after you shred it. “Bra, I filled up like 6 gnar-buckets working my boards on that glade”

Hit the freshy pow-pow – Ski/ride in new-fallen snow. “Wake up kid, you looked outside yet? We’re gonna totally hit the freshy pow pow today!”

Sesh it up – definition unknown but if asked this the answer is always “yeah man”. “Did you sesh it up that time?” “Yeah man.”

Over-Under – a game skiers play whereby one skies under the other’s legs. “Dude over-under looks kinda gay but it’s actually pretty gnar”


Bloomberg Headlines, 2007 vs the Future

How bloomberg headlines read in 2007:

Crude reaches new high up 2% to 89.30 nearing Goldman $100 target. Citigroup shares fall below $30 on further writedowns of $5bn

How bloomberg headlines will read in the future:

Dollar reaches new record low -2% to 0.011 barrels of oil nearing Goldman target of 0.010. Citigroup shares fall below 0.34 barrels of oil on further writedowns of 56m barrels of oil.


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