Long or Short Capital

Ballers vs mini-ballers is a class clash that reverberates through today. It is especially appropriate as markets collapse, and a global financial crisis begins that will destroy almost all investors wealth (we will have more on this in a December report), leading to unemployment and the derichment of scores of BSDs. ONN did a video report highlighting some of these issues, and is a must watch for ballers and mini-ballers alike.

Recommendation: Don’t judge a rich person until you have walked a month in their repossessed hovercraft. Long The Wealthy, short poor people.

It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!
Edwin Lefevre

Past Quotes Entirely Relevant to Investing

Building on the phenomenal success of the European Chunnel, government planners are coming up with more ways to inventively throw citizens’ money at a hole in the earth. In addition to the Turkish “chunnel” known as Marmamray, we have this development:

In recent months [the] governments of Morocco and Spain have taken significant steps to move forward with plans to bore a railroad under the muddy bottom of the Strait of Gibraltar. If built, the project would rank among the world’s most ambitious and complex civil engineering feats, alongside the Panama Canal and the Channel Tunnel between Britain and France.

Consider some of the benefits of the proposed Spain-Morocco chunnel :

• The Spain-Morocco project is more ambitious than the Chunnel, which was famously delayed, over-budget, and ended up on the verge of bankruptcy. To paraphrase analrapist Tobias Funke: “These huge public works tunnels that cost tens of billions never work. I mean, these people somehow delude themselves into thinking it might, but…. but it might work for us!
• The tunnel will connect a Muslim nation to a Christian continent, making it easier for religious dissidence to spread explosively. It’s REreconquista time!
• Relatedly, this project will greatly increase the demand for TSA types who will be needed to inspect the cars, buses, and camels who travel through the tunnels.
• Private investors who lost money on the Chunnel project will have their chance to recoup Chunnel losses and hit it big in the underwater tunnel investment market.

Recommendation: Long planes, Short chunnels, especially those linking Turkey to anything but mashed potatoes and gravy.

These heroes of finance are like beads on a string; when one slips off, all the rest follow.
Henrik Ibsen

Past Quotes Entirely Relevant to Investing

Long or Short Capital will not be able to file its financials at this time due to several accounting irregularities which have been brought to our attention. Chief among them is an issue concerning our cash balances. Our cash on our quarterly basis does not line up with our annual changes. As you know, according to SAAP, this is a problem that can usually be cured by merely choosing which number seems more appropriate. Other solutions include “making it up” or “embezzling the difference.” To ensure that we effect the best possible outcome for Long or Short and its subscriberholders, we plan on retaining the services of an external accountant who is fully versed in SAAP and can advise us on the proper steps to take.

We assure you that we do have cash (somewhere) and that there will be at most a $1 million change in our cash balance as a result of these irregularities. Based on all the Qs and Ks which we have read, $1 million isn’t much, so there is no reason for concern. We appreciate your patience in waiting further for our financials.

Corporate Speak

Shaking up the highest ranks of the video game industry, Electronic Arts, the world’s largest publisher of video games, said yesterday that it had hired Peter Moore, head of interactive entertainment at Microsoft, to run its large but sluggish sports division.

Microsoft said that Don Mattrick, a longtime game executive who had served as an adviser to the company since February, would take over game operations at Microsoft. Mr. Mattrick had been considered a leading candidate to become chief executive of Electronic Arts before leaving the company last year.

Translation

Electronic Arts said yesterday that it appointed Peter Moore to run its large but sluggish sports division. Mr. Moore has extensive experience running large, sluggish organizations. He helped launch the Xbox and Xbox360 products for Microsoft, products which successfully reached millions of people while losing only billions of dollars.

Microsoft said that Don Mattrick would take over game operations at Microsoft. Mr. Mattrick had left Electronic Arts after losing a power struggle and, given his experience at the large, sluggish EA publishing division, can quickly fill the leadership void created by Mr. Moore’s departure.

Natexis Bleichroeder is now Natixis Bleichroeder

Thank you Natexis Bleichroeder salesman for letting me know that Groupe Banque Populaire merged some of its operations with some of those at Groupe Caisse d’Epargne to create the new, improved Natixis Bleichroeder. I imagine that one letter change will make a big difference in performance going forward. I don’t remember doing any business or trading with you in the past but I’m sure that will now change.

IM conversations at leading funds:

Analyst: I think that this maker of ball bearings is quite attractive because of its strong operating momentum, $500mm net cash position, and dirt cheap valuation of 6x fully-loaded FCF.
PM: WHAT IS THEIR SUBPRIME EXPOSURE?!?
Analyst: They don’t own subprime. Or sell houses. Or sell into housing-related markets. Or have variable rate debt.
PM: OK BUT ARE THEY EXPOSUDED TO THE SUBPRIME PRESSURE ON YIELDS?
Analyst: No
PM: I LIKE THE NAME BUT WANT TO OWN IT 10% CHEAPER
Analyst: They’re buying back 10% of shares outstanding this year.
PM: WHAT ABOUT SUBPRIME? ANY EXPOSURE THERE?
Analyst is now offline

Dear Valued Client:

As you may know, the investment process has a normal course. Generally accepted investing practices follows that you, the investor, give us, the manager, money. As manager we take that money and buy something with it. This something generates profits and at the end of the year, we pay ourselves some dollar percentage of those assets, as well as some percentage of the generated profits. Everyone profits which is a good thing.

Unfortunately, the money you gave us did not follow this normal course. Per usual, we “invested” your money in tranches of CDOs comprised solely of loans to people who specifically would never be able to pay down their mortgage. Their inability to pay was the very thing that made these such great loans and allowed us to demonstrate to you a profitable two year record of performance. This could have continued but your money decided to disappear.

As far as we can tell, there is no current record that points to existence of your money. It’s no longer part of our assets under management. Look, it’s up to you how you raise your money and I don’t want to get into a nature vs nurture sidebar with you, our valued client. But don’t you think that maybe you should have imbued your money with more of a sense of sticktuitiveness? I mean, it literally seems to have vanished at the worst possible time, what with the depressed prices and attractive yields which now litter our market. This is when we could be printing profits for you (if only your money hadn’t disappeared).

I guess, for us, we’re disappointed in you. Your role is to let us take your money, assume none of the risk and allow us to give you some of the return. Don’t you see how this relationship breaks down if you allow your money to disappear? We’re not angry with you, just disappointed. It’s your loss, as we still earned our management fee, it just seems like a waste for you.

I have enormous confidence in Long or Short Capital management and the ability of our talented professionals to bring you the highest quality products and services now and in the future as they have in the past. You can count on us to deliver…if you don’t let your money vanish.

Sincerely,
Mister Juggles

Related: PDF of Bear Stearns Asset Management Letter via Dealbreaker.

[Applied economics and policy analysis] boil down to three imperatives (ten little words).
1) at what cost?
2) compared to what?
3) how do you know?
Peter Gordon (Ht: Newmark’s door.)

Past Quotes Entirely Relevant to Investing

Long or Short Capital’s ascendancy began 2 years ago today, with this first recommendation. Anyone who heeded our advice squeezed tremendous hypothetical returns out of the citrus trade.

In this short period of time we have:

• Migrated our operation from Blogger.com to an enterprise solution
• Published hundreds of in-depth (or shallow) notes on the market
• Become the #1 abstract long or short investment advisory firm on the internet and in the world

For the next two years, our primary goals include:

• Piratery
• Replacing Hank Paulson as Secretary of the Treasury with Dr Deep Gupta
• Gain acceptance of SAAP such that we are finally able to IPO on the NASDAQ

You are welcome for providing two years of an incredible investment commentary and analysis.

Anti-market forces have realized that the best way to fight low wages is to hire people at low wages. After all, protesting is boring and somewhat demeaning for a union member. So it’s much more efficient to hire homeless and transients. If only there were more Mexicans in DC…

Outsourcing the Picket Line

The picketers marching in a circle in front of a downtown Washington office building chanting about low wages do not seem fully focused on their message.
…
Although their placards identify the picketers as being with the Mid-Atlantic Regional Council of Carpenters, they are not union members.

They’re hired feet, or, as the union calls them, temporary workers, paid $8 an hour to picket. Many were recruited from homeless shelters or transitional houses. Several have recently been released from prison. Others are between jobs.

“It’s about the cash,” said Tina Shaw, 44, who lives in a House of Ruth women’s shelter and has walked the line at various sites. “We’re against low wages, but I’m here for the cash.”

Ht: marginalrevolution

When the Justice Dept won its antitrust case against AT&T, the company was split into multiple local operating companies. AT&T focused on the long distance market. Now, those companies have recombined to the point where only three remain: Verizon, AT&T, and Qwest. Essentially, the old AT&T has been reformed in three geographic regions. Why is this? Because of the Regulatory Inefficiency Theorem.

The Regulatory Inefficiency Theorem states that any move by a regulator will thereafter be reversed by the market. The time to reversal will vary inversely with the amount of regulatory oversight implemented whereas the lobbying dollars spent will vary directly.

In the case of telecom — an industry with large returns to scale — there is more regulatory oversight than almost any other industry. And, as our RIT model predicts, we observe a near complete reversal of the regulator’s actions over time combined with immense lobbying efforts. In fact, according the Post, the telecom industry spends more on lobbying “than the tobacco, aerospace and gambling lobbies combined.”

Click through for whole chart

Source Freepress.net

Insanity in individuals is something rare – but in groups, parties, nations and epochs, it is the rule.
Friedrich Nietzsche

Past Quotes Entirely Relevant to Investing