Long or Short Capital

Prices for certain foods are up big. On its last conference call, Costco — in response to a question on where they were seeing price inflation — cited blueberries (up 20%), cheese (mozzarella up 25%), chicken (up 12-15%), coffee (up 12-15%), and butter (up high single digits). These are excellent returns if you’re holding food inventory.

Recommendation: We advocate buying large quantities of cheese, coffee, and butter. Rent temporary storage if necessary. But the best way to play this is probably through live chickens. Own the inventory (chickens) for price appreciation while clipping the dividends (eggs) in the interim. It’s a no lose proposition.

Luck is a dividend of sweat. The more you sweat, the luckier you get.
Ray Kroc

Past Quotes Entirely Relevant to Investing

Long or Short Capital’s third quarter of fiscal year 2007 closed on April 30th, 2007. After reviewing our financials, we have determined that the quarterly dividend will be at the formula level of $0.75 per a subscriberholder as of 4/30/2007. To qualify, all you need to be is a subscriber, either by XML or E-mail, as of 4/30/2007. If you were not, you will not be eligible.

For more information on how to collect your cash or cash equivalent dividend for Q3, please refer to our Dividend Policy. Given our float of 1012 subscriberstakes (as of 4/30/2007), a 5% growth assumption and our trailing twelve months total of dividends of $3.65 per subscriber, our current capitalization is $193,925 using a dividend discount model.

This will work as there is a definitive unmet market here:

Recommendation: Formulated with a unique mix of nothing at all, Diet Water is a compelling sell to health conscious consumers who are weary of being force-fed waters that aren’t not dripping with no calories. Now they have a healthy alternative that allows them to consume as much water as they want without gaining any weight. Long diet water. Porkers and women will buy anything, even if it’s nothing. In fact, they will frequently pay a premium for products with high levels of nothing content.

Skepticism is the chastity of the intellect, and it is shameful to surrender it too soon or to the first comer.
George Santayana

Past Quotes Entirely Relevant to Investing

Baby carrots are hot right now. So hot. Chicks love them. Metrosexuals love them. This why they’re hot: uniform appearance, small, cute, and crunchy.

At your local grocery store, baby carrots command a price premium — normally around 100% — to regular carrots. However, it turns out that they are made from “culls, which are carrots that are too twisted, knobby, bent or broken to sell.” Not only that, they “are made out of a variety of carrot known as the Imperator. They are bred to grow faster and ripen quickly, and because of this, they only have 70% of the beta carotene of a normal carrot.”

Recommendation: Go long carrots and short baby carrots. We expect the pricing spread to narrow as regular carrots are repackaged as babies. Eventually, all non-snowman-production-related carrot consumption will involve baby carrots and, at that point, they will be priced like regular carrots.

In order to more efficiently exploit our subscriberholders, we need to know more about them. In this vein, we urge you to take this reader demographic survey. We promise there will be beer and alcohol involved. And strippers*.

*Strippers are conditional on you doing the survey within the confines of a participating strip club.

China to Reinvest Bubble Proceeds in New, Larger Bubble

From Kevin Depew’s piece on China and Blackstone. Later in this piece is this gem “Anyway, it’s a good deal for Blackstone, because nothing says ensured profitability, prosperity and success like giving up an 8% stake of your firm to communists.”

Why would the majority favor policies that hurt the majority? … The majority favors these policies because the average person underestimates the social benefits of the free market, especially for international and labor markets. In a phrase, the public suffers from anti-market bias.
Bryan Caplan GMU Economics Professor

Past Quotes Entirely Relevant to Investing

From reader “Butters” in the suicide capital of the world:

Jalen Rose of the Phoenix Suns recently commented on ESPN that without Amare Stoudemire they, “gotta find a way to get it done.” I immediately began to wonder: Is Rose a baller or a mini-baller? His command of the mini-baller language obviously indicates mini, but he does pull down 1.5MM a year and is by definition a basketBALLER.

Is there some forum where public figures can be judged on their mini-baller status? If not, albeit off-topic, I believe LoS’s market leadership in mini-baller affairs would make them a prime candidate to initiate such a forum. Make it happen.

We’ll proceed on a case by case basis. Jalen Rose is most definitely a baller, he can say “Get it done” because the man has done a lot of getting it done in his life. He probably got it done with 4 girls hotter than any you have ever seen simultaneous with his appearance on ESPN. Plus, as you point out, he is a basketBALLER on the grand stage of the NBA, so even if you stick to the epistemological roots of the term, he is a baller. This analysis cost you $4,999. Please send your check to the house to the right of http://longorshortcapitak.com, right next to http://longorshortcapitam.com.

Long or Short Capital’s fiscal 3rd Quarter ended on 4/30/07, and the company reported its results in a press release:

Mr Juggles: “Morning all. The third quarter was a transitional one for Long or Short. We took part in initiatives which had a negative short term impact on our financials, but which will position us for a higher level of long term sustainable earnings. Additionally, we put less focus on unadulterated traffic growth and more focus on user interaction. Lastly, we worked with our customers to squeeze working capital down to more efficient levels to drive cash flow. Any quarter would have been disappointment following the milestones we were able to blow out of the water in Q2’07, but I am proud to say that I think management proved in Q3 that we will not pander to short term financial metrics, unless it will increase value to subscriberholders, in which case we will pander to short term financial metrics.

Sequential same store traffic, our measure of organic traffic, showed a 5% positive trend against Q2. Considering that last quarter was our historical peak, it means this quarter is now our historical peak, and this is, clearly, historical. Our proprietary “Eyeball Monetization Conversion” ratio, a non-pageview measure of revenue generated per customer, decreased from $18.43 to $14.49, expected due to a scale-back in static advertising and other strategic initiatives which I will address later. Our EMCr still improved 67% on a year over year basis.

We generated earnings per subscriberholder of $0.91 compared to $2.12 in the second quarter and $0.60 in Q1. We generated $947 in revenue for the quarter, a 685% increase year over year, and slightly down sequentially. Our dosey-doe with Google Adsense and Yahoo Publisher resulted in yet another switch, this time from Yahoo to Adsense at the beginning of April. We made the switch due to our dissatisfaction with the relevance of Yahoo’s ads, as well as cost-per-click levels which were sub-twenty cents. We will continue to dynamically adjust to changes in the contextual ad market.

Text link advertising remains the stalwart of our topline, but it experienced a diminution. We sold a full load of Text Link Ads inventory in the second quarter. Subsequently, management determined that a substantial portion of that ad inventory was being delivered at sub-market rates with unreasonable contractual terms. We elected to reduce the ad inventory sold through that channel from 10 links to 1 link. This had a negative $350 impact on our topline. Management believes it is in Long or Short’s long term best interest to hold back supply while pushing for Google Page Rank 6, and then seek out premium pricing selectively. If you have the ability to link to us or coerce high page rank friends to link to us, this will help greatly in our efforts to achieve Page Rank 6, and only further the growth the amount of money we dividend to our readers and get us a step closer to feeling ok buying iPhones for our children’s stuffed animals.

We had one successful CPA campaign which we launched late in Q2 with Everybody’s Gonna Get Laid Except You and followed with “Buy Your GF Flowers Now. Get It Done“.

Our subscribership increased from 508 to 1012. Approximately half that is organic growth and half that resulted from a change in the way Google Reader shows up in susbscriber stats, namely that it does show up now.

Our free cash flow is something I am really proud of and thanks to the good work our finance department did in reaching out and shaking changes out of our customers (laughs), those slow paying mother (expletive), (laughs) (inaudible), we generated free cash flow of $1,417, an increase of 200% sequentially, and higher than our cumulative free cash flow up until the beginning of this quarter. We set a target on last quarter’s call for working capital to run in the 30-35% range and we like the progress we were able to achieve in just one quarter. We are exploring uses for our cash which include but are not limited to investments in regional financial humor producers, acquisition of competitors, complicated structures involving SPEs that would allow us to mislead potential investors, or one really nice corporate pen.

Transition doesn’t sound sexy, but let me tell you, it will be. By way of example, we are like that 7 coming out of college, you know the one, brunette with an ok body ok face and has never really put it altogether. Two years out of college, she is exercising twice a day, not-eating three healthy meals a day, she blondes her hair and learns how to get it done with makeup, and now she is a 9 plus and everyone is bidding up her assets. And how does she get that done? She transitions. And that is what Long or Short is doing, transitioning. Thanks for your time, and have a great night.”

Top Articles from the Third Quarter

1. Four Simple Steps to Becoming a Thousandaire
2. Jacob, Son of Isaac, the First Value Investor
3. Adjusted GPA on a Pro Forma Basis
4. Pomegranate Capital Thinks Women Can Run Money Better Than Men, Is Wrong
5. Crazy Person or Bluetooth Headset?: The Home Game
6. The Market, She’s a Bitch
7. Dogs Can Smell Fake DVDs and Other Malaysian Lies

Top Articles from the Second Quarter

1. Vertizontal Consolidation
2. Stop Global Warming, Make Emissions More Delicious
3. 2×2 Matrix: Less is More
4. Accounting in My Refrigerator
5. Joe Theismann Presents Monday Morning Investing
6. Critical Mass Supplier
7. Kaiser Falcon Eyes

Note that the financials below are unaudited and may contain non-GAAP measures. All numbers comply with Seldom Accepted Accounting Principles (SAAP).

Unaudited Financial Results for Q3’07
Income Statement

Contextual CPC Revenue $229
CPA Revenue $109
Static Ad Revenue $594
Other Revenue $15
Total Revenue $947

Cost of Sales $19.55
SAAP Income $926.9

Balance Sheet

Cash $1962
Accounts Receivable $302
Inventory $0.00
Prepaid Marketing/Hosting/Reg $146
Accounts Payable $0

Cash Flow Statement

Operating Cash Flow $1417
Capex $0.00
Dividends $X.00

Performance Metrics

Visits 65,290
Pageviews 133,960
Clicks on ads 282
Subscribers by Email 159
Subscribers by XML 853
Inbound Links per Technorati 394 from 148 Sites
Technorati Rank 27,274
Inbound Links per Google ~399 sites
Google PageRank 5

Past Results (due to our reliance on SAAP, previous unaudited financial results are not reliable)
Long or Short Capital Q1’06 Results
Long or Short Capital Q2’06 Results
Long or Short Capital Q3’06 Results
Long or Short Capital Q4’06 Results
Long or Short Capital Q1’07 Results
Long or Short Capital Q2’07 Results

Also here is a look at our Google Spreadsheet Financials spread out quarterly. As you can see, we strictly adhere to SAAP.

Source: NY Post

More evidence, this time from the NYPost, that Vice funds are better than Green or Socially Responsible funds. When you’re goal is to make money, give your money to the guys without scruples.

Here are three sectors with terrible fundamentals:

1. Autos — No demand. Terrible labor relations. Rising gas prices. EPA is about to crack down.
2. Paper — China is killing paper pricing.
3. Housing — As mortgage financing falls apart, so does the housing sector.

The most surefire way to make money shorting a stock would to be to find a company that somehow participated in all three of these known negative trends. Therefore, I appeal to you, the crowd to help me find a manfacturer of RVs made out of paper. Or an operator of garages for paper automobiles. Or a home builder who designs and sells houses made out of paper made out of automobiles.

I am desperate. If these companies don’t exist, perhaps we should start one so we can then short it?

Their new president plans to implement controversial legislation by waiting until all his citizens leave for their (long) vacation. Brilliant and yet pathetic, a la meme fois.

Parliament usually is away from mid-July to October, but Mr. Sarkozy has suggested he would call a special session to push through legislation while most of the French are vacationing — and when it would be hard for unions to mobilize them.

The unions warned against it. “Whoever is elected president, if he or she thinks there are things that must be decided very fast, in a flash, and pass them in July, watch out,” said Mr. Mailly of the Force Ouvrière federation. “There’ll eventually be a boomerang effect.”

Absurd. The US equivalent to this would be traders running up the price of thinly-traded and heavily-shorted stocks during August when the entire financial community is out in the Hamptons. Oh wait…

Recommendation: Long summer vacations, short France and the Hamptons.