Long or Short Capital

Unaudited Financial Results for FY’06

Income Statement

Contexual CPC Revenue $335.45

Static Ad Revenue $183.43

Other Revenue $32.13

Total Revenue $551.01

Cost of Sales $98.65

Marketing Expense $174.09

Operating Income $278.27

Balance Sheet

Cash $0

Accounts Receivable $177.12

Inventory $0.00

Prepaid Hosting/Reg $125.50

Accounts Payable $0

Cash Flow Statement

Operating Cash Flow $278.27

Tax Distributions to Partners $80.00

Capex $0.00

Dividends $X.00

Performance Metrics

Visits 119,920

Pageviews 212244

Clicks on ads ~767

Ad impressions served ~410000

Subscribers by Email 50

Subscribers by XML 232

Inbound Links per Technorati 154

Inbound Links per Google ~71 sites

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’s fiscal 4th quarter ended on 7/31/06, and the company reported their results for both Q4’06 and FY’06 in a press release on their site:

Mister Juggles: “Long or Short had 4th quarter performance in line with management’s expectations for the slower summer months. Sequential same store traffic of 21%. This is the key figure I would like to share with you in today’s call, and while there are other figures that would show what we have done, these figures would be much more ambiguous, some could even be used to make our results look “not so hot.” Sequential same store traffic is a like-for-like measure of our number of visits in Q4 compared to Q3. As you can see, we were 21% more trafficked than last quarter, a growth rate which is the best in the Online Financial Humor/Abstract Investment Recommendation Industry.

We generated earnings per a subscriberholder of $0.38 compared to $0.32 in Q3. Our accounts receivable is a little higher than we’d like it to be due to unfavorable payment terms and a one-off timing issue with one of our largest accounts. Working capital was also challenged by our securing of a 5 year extension of our domain registry costs, which was payable up front. Revenue was flat sequentially but our reliance on Yahoo CPC advertising has been reduced and our runrate revenue should be at a higher level. In the Yahoo segment, our click through rate increased 20% sequentially, but that gain was offset by a 34% decrease in our revenue per click. Our suscribership increased from 161 to 282.

We now have $115.56 of Payment-in-Kind (PIK) debt which is off-balance sheet and was previously undisclosed. Management has experience operating in a leveraged environment, and the debt should be reduced substantially by the end of Q1’07 from working capital.

We passed several milestones in our first year, including our 30,000th visit to our new storefront, as well as 100,000th visit overall. We also fell in love. We hope that in the coming year we can repeat what we did well last year, and improve on it, by approximately 5-7% in every measure.

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 Q4’06

Income Statement

Contextual CPC Revenue $38.47

Static Ad Revenue $78.50

Other Revenue $14.11

Total Revenue $126.08

Cost of Sales $19.55

Marketing Expense $0.10

Operating Income $101.43

Balance Sheet

Cash $0

Accounts Receivable $190.14

Inventory $0.00

Prepaid Hosting/Reg $115.05

Accounts Payable $0

Cash Flow Statement

Operating Cash Flow ($34.83)

Capex $0.00

Dividends $X.00

Performance Metrics

Visits 16,900

Pageviews 31,850

Clicks on ads 100

Ad impressions served 55,000

Subscribers by Email 50

Subscribers by XML 232

Inbound Links per Technorati 154

Inbound Links per Google ~71 sites

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

Monopoly is a metaphor for life in many ways. For instance, people often claim the outcome depends little on skill and largely on luck. In reality, the best way to win is the same as in life: become the banker and then skim off the top. However, this equation may change with Monopoly’s introduction of a version that uses debit cards rather than cash. This trend should reduce the demand for Monopoly money and increase the velocity of virtual currency.

Furthermore, cheating will become more costly as the requirements have increased from merely being bold, sly, or sticky-fingered (aka a generic finance type) to having a computer science degree (aka a generic nerd). This will represent a shift in the labor supply curve of thieving bankers. Increased regulation and greater financial transparecny should also serve to reduce shadow market opportunities in the greater Monopoly market, such as trades in “One in every currency for rolling snake eyes” or “All the cash in the middle for landing on Free Parking.”

This is a response to all those who emailed doubting the veracity of the camel’s affinity for Coke. A camel sipping Coke and a camel chugging a Coke bottle. We value empiriscm above all else.*

*Unless empiriscm was empirically proven to be less valuable than some other measure.

Gold is your chance. Gold is everyman’s opportunity… Every defect in a man and in others’ way of taking him, our agreement that gold has value, gives us power to rise above… The value I gave the gold restrained me, you see, your utility in connection with it. And because of my gold, those at the other tables deferred to my restraint… Gold confers power. Power comes to any man who has the color… That is our species hope. That uniformly agreeing on its value, we organize to seek the color.

-George Hearst, on Deadwood

Past Quotes Entirely Relevant to Investing

Following the release of Long or Short Capital’s Third Quarter financial performance, the company is offering a $0.60 dividend per a subscriberholder as of 4/30/2006. To qualify, all you need to be is a subscriber, either by XML or E-mail, as of 4/30/2006. For more information on how to collect your cash or cash equivalent dividend, please refer to our revised Dividend Policy. Given our float of 161 subscriberstakes (as of 4/30/2006), a 5% growth assumption and our dividends to date, our current capitalization is $22,181 using a dividend discount model.

During the first period of a man’s life the greatest danger is: not to take the risk. When once the risk has really been taken, then the greatest danger is to risk too much.

-Soren Kierkegaard

Past Quotes Entirely Relevant to Investing

Long or Short Capital’s fiscal 3rd quarter ended on 4/30/06, and the company reported their results in a press release on their site:

Mister Juggles: “Following our best quarter ever, Q3’06 occurred amongst a background of industrial turmoil, rising oil prices, the month of March and global uncertainty. In that context, we are satisfied with our results and if we continue to pour our beakers full of managerial brilliance into this frankenstein we are confident that our Q2 performance will be more predictive of our future results than Q3. While management’s options were underwater at quarter end, a board approved “Put the Options Back in the Black” KERP plan was initiated ensuring that management will continue to be properly incentivized.

We generated cash earnings per a subscriberholder of negative $0.22 a positive increase of negative 46% over last quarter. We were cash flow positive for the 1st time in history with $35.14 of cash flow before dividends and tax distributions; this is mainly attributable to an improvement in working capital. Revenue decreased 38% sequentially, but increased Div/0% year-over-year. We faced both a 50% decrease in our click through rates for our contextual advertising and a 50% decrease in revenue per click. Our suscribership increased from 85 to 161, almost doubling.

Operation Sir-Click-A-Lot was an abject failure, and had no effect on our top line. Traffic wise we performed in line with expectations. The first full quarter at our new storefront @ longorshortcapital.com has proven to be all we expected, and its strategic location between longorshortcapitak.com and longorshortcapitam.com has given us a steady flow of captive readers.

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 Q3’06

Income Statement

Contextual CPC Revenue $71.58

Static Ad Revenue $38.02

Other Revenue $11.00

Total Revenue $120.60

Cost of Sales $15.00

Marketing Expense $50.00

Operating Income $55.60

Balance Sheet

Cash $55.83

Accounts Receivable $88.10

Inventory $0.00

Prepaid Hosting $30.00

Accounts Payable $0

Cash Flow Statement

Operating Cash Flow $82.96

Tax Distributions to Partners $80.00

Capex $0.00

Dividends $X.00

Performance Metrics

Visits 13,950

Pageviews 26,150

Clicks on ads 90

Ad impressions served ~43,874

Subscribers by Email 34

Subscribers by XML 127

Inbound Links per Technorati 108

Inbound Links per Google ~40 sites

Past Results
Long or Short Capital Q1’06 Results
Long or Short Capital Q2’06 Results

First of all, in response to reader’s questions, you are right: NOTHING I WROTE LAST MONTH SPECIFICALLY APPLIES TO ZAMBIA. Thanks for writing in. Now, back to the topic at hand.

I had the worst nightmare of my life last night. I dreamt I was going to Harvard Business School. I packed my apartment, said goodbye to my roommate, and left for school the next day. HBS was filled with annoying types, attempting to network their way to a decent career. But the worst part of the dream was when I realized that the only reason I was at Harvard was that I hadn’t killed it in the market during the previous year.
Needless to say it was terrifying.

But I should say too that in these rooms just this afternoon such displeasure brought me near to murdering the Sheriff and raping Mrs. Ellsworth. I have learned through time, Mr. Tolliver, and as repeatedly seem to forget that whatever temporary comfort relieving my displeasure brings me, my long-term interests suffer. My proper traffic is with the Earth. In my dealings with people, I ought solely have to do with n*****s and whites who obey me like dogs.

-George Hearst, on Deadwood

Past Quotes Entirely Relevant to Investing

Every investor loves to believe that he is the second coming of Warren Buffet so I’m never surprised to hear allusions to Buffet’s methods and sayings. At least that was true until I met Richard Ji, a nice, well-intentioned equity analyst at Morgan Stanley. Ji, however, frequently refers to Buffet concepts in his writings covering the CHINESE INTERNET sector. There are many places in which it makes sense to apply ideas like margin of safety but I promise you that the Chinese internet is not one of them. Last time I checked, Buffet didn’t buy tech companies let alone those trading at 4-8x book value.

Mr. Ji helpfully provides a chart explaining the stunningly complex mood swings of Mr. Market.

Ji also points out the wild variance in Mr. Market’s willingness to pay 30x at some times for Chinese Internet companies and only 25x at other times.

You may want to read some of Mr. Ji’s other work. Here are the actual headlines from some of his most recent reports:

• “Netease.com: A 3-in-1 Gourmet Combo Offered by Mr. Market”
• “Focus Media: ‘Blue Ocean’ Innovator in the Advertising Universe”
• “Ctrip.com: 1Q06: The Second Stress Test for Level 5 Leadership”
• “Tencent: 1Q06: Firing Up All the Cylinders”
• “Sohu.com Inc: 1Q06: Gaining Content Edges in a Harmonious Society”

If you know what any of these titles mean, please email us and let us know.

The wicked smart economists at Marginal Revolution have made a critical breakthrough, improving the CAPM model commonly used by financiers.

The Capital Asset Pricing Model specifies that the expected return on an asset is a function of the market rate of return plus another factor (“Beta”) for the covariance of that asset with the market portfolio. The intuition is that pro-cyclical assets are riskier and thus they must give you higher expected return. But I don’t buy the whole Beta bit, especially not for equity markets:
…
For risky equity assets in the United States, my preferred economic model is simple. Expected return equals seven. That is my model, “Seven.”

Here at Long Or Short, we don’t generally use CAPM due to our proprietary – and superior – 126 factor model. However, we sometimes use CAPM to see what the plebes are thinking and, in such cases, we will use a Beta of 1 and Expected Return of 7.

Most economic fallacies derive from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.

-Milton Friedman

Past Quotes Entirely Relevant to Investing

Banker hoes L-O-V-E Udon noodle soup because it’s just like them: An emaciated, white, bland peace of Tofu, surrounded by other Udon sisters waiting to be gulped down by someone with a severely suppressed palate.

-Anonymous from The Leveraged Sell-Out

Past Quotes Entirely Relevant to Investing