Long or Short Capital

One common criticism of attempts to redistribute financial income — for purposes of fairness — is that financial income is generally earned, after some fashion. Is the government also going to redistribute good looks, talents like a great voice or acting ability, or height (from the tall to the short)? I think I read a research paper of some kind where this worked out fantastically well. Depends on your definition of “well” I suppose.

I am glad to see that the current administration has proven faithful to its philosophy and is now distributing jobs without regards to qualification or merit.

The 31-Year-Old in Charge of Dismantling GM

It is not every 31-year-old who, in a first government job, finds himself dismantling General Motors and rewriting the rules of American capitalism.

But that, in short, is the job description for Brian Deese, a not-quite graduate of Yale Law School who had never set foot in an automotive assembly plant until he took on his nearly unseen role in remaking the American automotive industry.

Nor, for that matter, had he given much thought to what ailed an industry that had been in decline ever since he was born.

Recommendation: It appears increasingly likely that a) most jobs will be controlled by Washington in the future and that b) these jobs will be distributed on a semi-random basis, with little regard to qualifications or merit. This provides an excellent opportunity for anyone wishing to find employment, change careers, or remake an American industry according to their hastily conceived notions. If you fall into one of these categories, we suggest you immediately contribute a modest sum to the Democratic Party of Hope, move to Washington, and wait. Develop a special trait such as a “beard that appears and disappears” that will allow you to catch the eye of a patron. Then re-design the industry of your choice. I’ve always had a taste for Plastics, myself. Or maybe Cable.

Woe to the company that ignores the customer.
-Fritz Henderson, CEO of General Motors

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Detroit News Editorial on Chrysler case:

Under the government-arranged settlement, Chrysler’s bondholders will receive $2 billion for their $6.9 billion in debt. That amounts to about 29 cents on the dollar. Nine-tenths of the creditors agreed to the deal, although most of them are banks and investment funds that are borrowers from the federal government.

Three Indiana pension funds, whose debt holdings amount to $42 million, contended that as secured lenders they should have received better treatment than such unsecured creditors as the United Auto Workers retiree health care trust fund. The UAW fund will receive 55 percent of the equity in a reorganized Chrysler while Fiat, which put up no money, will receive a 20 percent share as well as effective control of a new Fiat-Chrysler alliance.

Legal commentators have said the union received a better deal than is usual in a bankruptcy.

…

[The] decision on whether to accept the deal should have rested with the bondholders — not presented as a government ultimatum. Protecting the interests of secured creditors is the point of bankruptcy law

Au contraire! That WAS the point of bankruptcy law. Did you get that memo? Now bankruptcy is a place where secured creditors get screwed for political purposes and unsecured claims walk away with the keys to the company, while people ahead of them in line get a quarter for bothering to front the company money when it was needed most. In this case, the unsecured claims forced the filing by being so onerous and non-market, not unlike the market participants who took the most housing risk from 2004-2007, caused the US to file for bankruptcy protection (coming to a theater near you in 2021) and now are looking for handouts, so they can throw other people’s good money after their own bad. While it may be poetic that the UAW will own this slop of shit that makes cars that no one wants to buy, it’s also not fair.

What does this mean? I urge you to consider never lending any secured money to a troubled company, especially one in a political industry that employs a lot of people. It doesn’t matter what kind of collateral you have, or what kind of lien, or whether it’s Debtor-of-Possession or super ultra 1st priority magic loans, you’re risking your patient’s life investors’ money.

Recommendation: Short secured, long unsecured politically supported claims. Short existing bankruptcy law.

People care what I think. I have a prestigious blog, sir!
-Roman DeBeers on Party Down

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An email sent to JD on Monday

from:Hopman, Bret < [redacted]@condenast.com>
to: “Hopman, Bret” < [redacted]@condenast.com>

subject: Details Magazine

Good afternoon,
In the upcoming June-July issue of DETAILS (on newsstands Tuesday, June 2), we have a piece that looks at [something probably boring and that won’t be talked about on your site because there is a much better subject for your site].
Here’s the link to the story: [Redacted].
If you are interested in running something online, please be sure to show the cover (attached).

Please let me know if you have any questions or need anything else.

Thanks for your consideration!
Bret

My reply:

Bret Hopman,

I am confused. Is this a request that we run something online about it? Or are you giving us permission (thanks!)?

I’ll give you an idea of how we do things on the internet. You post something in your men’s magazine, I may or (more likely) may not give a shit enough to read it. If I were to give a shit enough to read it, and I was able to find some means of reading it, at that point I may or (more likely) may not give a shit enough to write anything about it on the internet’s most prominent satirical investment site. If, by some minor miracle, like the one that allows that oragutan in Australia to paint beautiful art or the one that allows people like you to navigate the internet and breath through your mouth at the same time, I chose to write anything about it on the internet’s most prominent satirical investment site, I would NOT in any way ask you how I should write about it nor would I care what your opinion was on the subject of whether or not to include the cover in the post. Bret Hopman of men’s magazine Details, get over yourself.

Sinceringly,
Mr. Juggles
longorshortcapital.com

Veridian Dynamics. Every day something we make, makes your life better. Power, we make that. Technology, we make that. Cows. Well, no, we don’t make cows. Although we have made a sheep. And medicines. And airplane engines. And whatever this is. And all sorts of things. Veridian Dynamics. Every day something we make, makes your life better. Usually. Veridian. Life. Better.
-A commercial for Veridian Dynamics from Better Off Ted

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From Bloomberg, Treasuries Fall on Concern Record Sales Will Overwhelm Demand:

Treasuries fell for a fourth day, pushing the difference in yields between two- and 10-year debt to a record amid concern record supply will overwhelm investor demand as the economy begins to show signs of stability.

…

“We are in a bit of a freefall,” said Kevin Giddis, head of fixed-income sales, trading and research at the brokerage Morgan Keegan Inc. in Memphis, Tennessee.

…

The decline pushed 10-year note yields to a record 2.75 percentage points more than two-year securities, surpassing the record of 2.74 percentage points set in August 2003.

The yield on the 10-year note rose 18 basis points, or 0.18 percentage point, to 3.732 percent at 4:19 p.m. in New York, according to data compiled by BGCantor Market Data. That’s the highest since Nov. 17.

Apparently, there is a finite limit to increasing the supply of something such that it will begin to become less dear. Some refer to this reversionary force as part of the unproven theory “supply and demand” wherein the basic concept is that if there is demand X for some thing T-Bill and there is supply Y then there will be price Z. If Y is decreased, then a new equilibrium price will be attained that will be higher than Z. If Y is increased, then a new equilibrium price will be attained that is lower than Z. Except for Giffen goods, never forget about Giffen goods.

Some people, and most politicians, insist that such forces and theories are not only unproven but are unlikely to exist. If they were to allow that “supply and demand” may exist, they would stress that it’s important that we do what we can to obviate our need for such burdensome natural laws. Is that not the mission statement of Government? To not only protect people from nature, from other people and more and more from themselves, but also eventually from gravity and its ilk? Progress.

Recommendation: We’re not sure but we don’t think the lowest Treasury yields in American history are sustainable forever, and that pushing them down now comes at a cost later. Long gravity, short magic.

[Where the Guide] is inaccurate it is at least definitively inaccucrate. In cases of major discrepancy it’s always reality that’s got it wrong. This was the gist of the notice. It said, “The Guide is definitive. Reality is frequently innacurate.”
–The Restaurant at the End of the Universe by Douglas Adams

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Are you guys just going out quietly?

No final email, no guns ablazing?

It’s been over about ten days now…

A certain Orioles prospect with a broken arm left this in our comments yesterday. Just to dispel any rumors, no no and no. You will believe me more when you see the investigative piece we have been doing, althought you won’t believe that grown adults spent the time to write it, much less to think it, even much less to share it with investors, and least of all to make enormous profits by unethically front-running it. We would never leave without shorting ourselves, which we may have done for 10 days, and we may have recently covered. This was a very profitable trade we have no idea why you didn’t make it.

No, what happened, and we knew this would happen at some point it’s natural, was what you see in those cialis ads. You know, Dick (LoS) has a problem getting it it up (posts) and keeping up with his much younger wife (our mistresses), but now Dick has all the energy in the world thanks to this pill (cocaine and mango juice). We have every intention to continue to erect our body of content, so don’t worry.

Recommendation: Short Matt Albers, our own personal Roubini.

TO: All Employees
Date: February 8th, 1978
SUBJECT: Celebrations of Any Kind

Per Edward Mike Davis’ orders, there will be no birthday celebrations, birthday cakes, levity, or celebrations of any kind within the office. This is a business office.
-MICHAEL D. CARROLL for Edward Mike Davis of Tiger Oil Company

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Mr Juggles: “What do you think about X stock?”
JP Sales: “Oh, I am so sorry. We lost our internet analyst. He’s in bed.”

Mr Juggles: “What do you think about X stock?”
[Mr Juggles hears a bunch of typing, as in typing on a Bloomberg]
JP Sales: “It seems to be hitting the bottom now.”
Mr Juggles: “You’re just looking at the share price on your Bloomberg.”
JP Sales: “Yes, that’s true.”

Recommendation: Don’t talk to your Japanese SalesGuy(s) too often.

As some of you may know, there is currently a financial crisis and the world is in the midst of what some heady shops are calling “The Great Regression.” Stalwart banks have been pushed to the brink of solvency and have been coerced by the Treasury into accepting money from TARP. Long or Short Capital, despite record profits and record operating cash flow, is suffering similarly. Last year, we were able to secure a Fed backstop for all our humor liquidity needs from “The Window” Window. However, we never got the same backstop for our “liquidity” liquidity due to the fact that our preliminary TARP approval was subsequently rescinded, unbeknownst to our highly compensated counsel. Recently, due to the macroeconomic headwinds, capital market disruption and (mostly) embezzlement of firm moneys by an unnamed employee (Johnny Debacle), Long or Short Capital was facing a severe liquidity crunch which made it impossible for us to engage in our side business of online reckless real estate speculation.

Facing a funding shortfall, Long or Short Capital re-applied for TARP funds to meet our short term liquidity needs. We were summarily rejected by one Timothy Geithner for being “Either way too insolvent or way too solvent, it’s impossible for us to know, don’t tell anyone, thanks dude.”

We were able to find an alternate funding program, the little used CARP, and we subsequently applied for relief under it. We were accepted into the program, but there was a catch. Instead of giving us cash, they gave us fish, specifically carp. Apparently, and this was unbeknownst to us at the time despite extensive due diligence and despite the retention of our aforementioned highly compensated counsel, CARP stands for “Crappy Asset Relief Poissons“. Paraphrasing something my corporate father told me when I was a corporate small child: “When the world gives you carp, it’s incumbent upon you to make carp juice and then to sell that carp juice to people who are incrementally less sophisticated and who have a track record of paying too much for carp juice.” And that is precisely what Long or Short Capital intends to do.

We are diligently working to renegotiate all our contracts over to a carp basis rather than their current USD basis. Upon the successful renegotiation of these contracts, and with continued support from CARP, we think our liquidity will be sufficient and our solvency situation will correct itself. Provided no one marks that shit to market. We appreciate the patient support of all our stakeholders in these challenging times.

When otherwise smart people start agreeing with the current administration that abrogating the rule of law and long-standing investor protections is a worth-while activity, we are in trouble and the type of trouble starts in “Z” and ends in “BABWE”. Specifically, we have reached the point where it is more attractive to invest in Canada or France. Wow. Never thought I would say that, but I will now say it again — it is more attractive to invest in Canada or France.

Vistaprint (NASD: VPRT) is the “new economy.” They got their start as a company printing business cards and flyers for small and medium-sized businesses. Now they also offer many other products that SMEs like and just launched a email marketing service to let SMEs reach their customers cost-effectively. This is a company that, like Amazon (NASD: AMZN), grows rapidly through innovation and automation. This is a modern business. And because Vistaprint is an online business, it could be run from just about anywhere. In fact, it will be soon due to a move that should serve as a wake-up call to America: Vistaprint is moving its domicile to the Netherlands and its headquarters and CEO are moving to France (?!?!). Why? They think it’s a better place to do business. France!

Here are the reasons Vistaprint thinks Paris is a better place to do business (taken directly from their quarterly report):

• Time zone centrality and flight connections
• Significant and growing Vistaprint operations in Europe
• Corporate history: founded in Paris; first manufacturing in the Netherlends
• Highly stable economic, political, and regulatory environment
• Commercial relationships and tax treaties with countries around the world

Recommendation: When US politicians start protecting the unions in dying industries, punishing investors who provide capital, and making life difficult for innovative young businesses to the extent that they start favoring France for its stable economic, political, and regulatory environment…then the US is officially on the road to the TaxApocalypse. Buy non-US assets and currencies in countries with stable economies and political systems.*

*if you find one of these, please alert us immediately, TIA.

All men dream: but not equally. Those who dream by night in the dusty recesses of their minds wake in the day to find that it was vanity: but the dreamers of the day are dangerous men, for they may act their dreams with open eyes, to make it possible.
-T.E. Lawrence

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