Long or Short Capital

And you know it hurts my feelings, if nothing else, that the Swiss franc is worth more than the dollar.
-Paul Volcker in an intereview this week with Charlie Rose

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For those of you who are worried about our humor liquidity, let me put it to rest. We will be able to continue to make our articles the best ever because the Fed has agreed to backstop all humor liquidity from their newly opened “The Window” Window. We can use as much as we want. Additionally, the restrictions have been lowered on the quality of the underlying jokes required to be used as collateral; pathetic wordplay jokes pertaining to regression such as “I’m regressing” now qualify along with the more traditional nuanced satirical jokes. “The Window” Window will be open to us for the period of one month from today. Also, “Today” resets every day. As a result of the fact that it is always “Today” we will have infinity months of federally guaranteed humor and we hope to remain humor solvent until this crisis abates. Thank you for sticking with Long or Short in this harrowing time.

The market today was, in technical terms, acting like a drunk. The most common explanation — found on the front page of the WSJ, top headlines on Bloomberg, etc. — concerns the complete destruction of a storied investment banking franchise and the Fed’s move to both lower rates and offer to loan money to anyone who hasn’t blown up yet.

There’s an alternate explanation though and applying Occam’s Razor (but not implying that anyone actually bothered to use it to shave) we believe this alternative explanation to be the more likely driver of today’s madness. Both the Fed and the Market got up early today, hung-over after a rowdy weekend of carousing wherein they had a few too many Guinness and a few too little corned beef and cabbage. The Fed told the Market that what she needed was an eye-opener. Then, not feeling much better, the Market was convinced that what it really needed was TWO eye-openers. 47 pints of guinesses, several 100+ intraday swings of the DOW, a bloodbath in commodities, and a literally immorable blackout later, the Market passed out on her couch with only the after taste of roofies and the burning sensation across her cheeks and lips of having made out with someone with a scruffy, likely peppered, beard.

Things you can buy for $2:

• 2 limes
• 1 organic avacado
• 15% of a drink at a bar
• A pound (sterling)
• A day’s worth of labor from a farmer in the Indian countryside
• Nothing at a strip club
• A payoff of that persistent newspaper boy who wants his $2
• 2.3 cheeseburgers from McDonald’s
• Medicine for an African child for a whole month
• Oh yeah and these guys….

Amazing Bear Stearns (NYSE: BSC) Fact: Their building is worth 3x more than what their equity was sold for.

Well, I vote not to approve the sale.
-Random Bear Stearns (NYSE: BSC) shareholder during the conference call to discuss the acquisition by JPM (NYSE: JPM)

Past Quotes Entirely Relevant to Investing

A life, Jimmy, you know what that is? It’s the shit that happens while you’re waiting for moments that never come.
-Lester Freamon on The Wire

Past Quotes Entirely Relevant to Investing

From Marginal Revolution comes news that the Dutch were fooled again and fell victim to the siren’s song of tulip bulbs:

Over here in the Netherlands, court proceedings are starting this week on the “biggest speculation fraud ever in the Netherlands”, according to a national newspaper that ran a big story about it today. Investors have lost tens of millions of euros in what turned out to be a big pyramid scheme.

Now for the ultimate irony. Any idea what these people were investing in? Tulip bulbs. Really.

Recommendation: These investors committed Number 37 of The 63 Classic Investing Blunders: Never invest in tulip bulbs in the Netherlands. Listed right after Number 36 — Never Invest Money with Orange People.

Leverage kills.
-The Market

Past Quotes Entirely Relevant to Investing

From JasRas in the discussion thread of this Big Picture post called Bernanke to Banks: Take the Hit:

“From the makers of TIPS, now the TRP: The Treasury Reduction of Principal Mortgage” now we protect you from inflation and deflation! Don’t worry about buying something at the peak anymore, with a TRP we’ll absorb the declining value so you don’t have to!”

Recommendation: It’s only a matter of time.

Long or Short Capital Released this statement on Monday.

“Long or Short Capital is now present on Twitter. Based on the fact that one of our main contributors uses it, we estimate that at least one of our readership uses it. We don’t know if any of our other readers are on Twitter, or use it, or care if we are on it. We do know that it’s likely that if you are on Twitter and formally didn’t care if we were on it, you now do based on our tacit mutual acknowledgement of our superior smarts.

For a little background, Twitter was started in 1904 by Dean Twitter as a cooperative insurance organization for car-owners. It developed into a competitor to car clubs such as AA, but also branched out into various insurance businesses and of course, stock brokering. The depression happened and that was bad for Dean Twitter, as it was for many people. Then in 2006, Twitter scrapped all of its successful existing businesses and invested all of its capital in creating a Web 2.0 social web-app that allowed for users to communicate with one another in a way somewhere between a blog, a chat-room and IM. This is called tweeting.

To follow us on Twitter, log on to AOL and navigate to keyword Longorshort on Twitter.

Our twitter strategy is currently as mature as our humor, so we are not sure to what extent we will make use of the platform, if at all, other than as currently represented. Despite this, we expect analysts to raise forecasts to much higher levels, and frankly, this would really help me a lot, because I plan to sell a lot of company stock and would appreciate the bump. [Gracias muchachos] [Spanish Editor’s Note].

Mr. Juggles”

But here’s my advice to the rest of you: Take dead aim on the rich boys. Get them in the crosshairs and take them down. Just remember, they can buy anything but they can’t buy backbone. Don’t let them forget it. Thank you.
-Herman Blume in Rushmore

Past Quotes Entirely Relevant to Investing

One corollary to the Regulatory Inefficiency Theorem (RIT) is that as regulations increase, attempts to circumvent the rules increase. In fact, if you are the first or the only company to find a loophole, the regulations can form a competitive barrier.

For instance, this old WSJ highlights the restrictions on outdoor advertising and companies attempting to get around them.

Local laws here generally ban billboards in areas deemed residential. But that hasn’t stopped an outdoor advertising company called Van Wagner from plastering hip neighborhoods like Chelsea, Soho and the Meatpacking District with bare-chested pitchmen for Abercrombie & Fitch, dancing iPod users and other immense ads.
The catch: a loophole in the law that allows billboards in areas once zoned for manufacturing — even though the factories are long gone.

…

Outdoor advertising companies frequently play cat and mouse games with city officials. In California, for example, a state law allows illegally erected billboards that manage to avoid citation for five years or more to be considered legal….One Los Angeles-based company, Regency, repeatedly lands in hot water. On New Year’s Eve 2004, a deputy manager for the city of West Hollywood caught company officials, led by co-owner Brian Kennedy, installing a large unpermitted billboard on the Sunset Strip.

In response to this game, companies like Truck Ads have created new real estate for advertising by looking at non-traditional sources, mobile ubiquitous ones.

We see a new opportunity for advertising real estate: People. Think about it, people are everywhere. Moreover, they move and they enter areas previously closed off to advertising. This has started in some form with sponsorships; you can’t advertise at the Masters but Tiger can wear a Nike sweater. But we suggest taking it to the next level the way GoldenPalace has.

GoldenPalace.com, the online casino famous for turning eBay into the ultimate advertising vehicle by acquiring several outrageous items is at it again. They have paid $18,000 to shave a woman’s head and permanently tattoo “GoldenPalacePoker.com,” the website of the popular online poker room, on her bare cranium.

Recommendation: We did some preliminary due diligence several years ago involving paying homeless people to do our advertising bidding and also on unions and causes outsourcing protesting to the homeless. We now recommend management buyouts of individual people. After permanently tattooing them with corporate advertisements, these people can be spun back out for their original value (minus a bald cranium discount). As long as corporate advertisements are trading higher than bald cranium discounts like they are right now, this is arbitrage heaven.

From a Bloomberg piece on the risk of another off-balance sheet (in this case, a VIE) potential problem for financial companies:

Predictions for losses vary widely because banks aren’t required to specify the type of assets being held in the VIEs or how much they are worth, said Tanya Azarchs, managing director for financial institutions at S&P.

“The disclosure on VIEs is hopeless,” Azarchs said. “You have no idea of the structure or how that structure works. Until you know that you don’t know anything. It’s like every day you come into the office and another alphabet soup has run off the rails.”

Tanya baby, I’m not gonna say you’re not doing your job, but uhh, you’re not doing your job! How can you rate companies and then admit you don’t know, and haven’t known, anything? And she is the HEAD for ratings of financial institutions.

From her bio at S&P

A managing director at Standard & Poor’s Financial Services Ratings Group, Tanya Azarchs is responsible for coordinating research on issues affecting financial institutions worldwide. She frequently authors research on special topics. Tanya is responsible for the ratings of large, complex banks and securities firms in the U.S. and Canada, and is involved in the analytical effort on Eastern European banks. She is also a member of the global financial institutions ratings criteria board, which develops ratings criteria and reviews ratings across the globe for consistency.

Why would someone like that think it’s ok to put out ratings when they lack knowledge?

She is a Chartered Financial Analyst.

Ahh, so knowledge IS a problem.

Recommendation: Short the balance sheet for any entity that has a lot off-balance sheet.

On February 23rd, Long or Short Capital released this statement.

Good morning. Stakeholders who have read our reseach piece on Mugabe Efficieny Theory know that Zimbabwe is the most progressive country in the world economically. Already, the ideas developed by Mugabe and contained with Zimbabwenomics have been adopted in Kazakhstan and by John McCain.

Well, when a Zimbabwean-based advertising opportunity arose, Long or Short’s interest was aroused. We are pleased to announce that we have purchased real estate on The Million Zimbabwean Dollar Homepage. We think, like most things Zimbabwean, the fundamentals of the Million Zimbawean Dollar Homepage suggest unfettered growth. We expect our stakeholders will benefit from the remunerative effects of this powerful investment in our own traffic. You’re welcome.

We look forward to updating our readers on recent financial results and our calendrical reporting shift in the next few weeks. Good day, sirs.