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Baker Hughes Wisely Forgoes HJs for BJs

Submitted by user KB

Baker Hughes to Acquire BJ Services in $6.9 Billion Transaction

  • Share price premium of 26.9% over the frothy closing price of BJs stock on August 28, 2009
  • Pressure pumping cost synergies of $75 Million in 2010 and $150 Million in 2011
  • Combination to be immediately accretive to EPS and other easily manipulated metrics

HOUSTON, Aug 31, 2009 — Baker Hughes (NYSE: BHI) and BJ Services (NYSE: BJs) today announced that their respective Boards of Directors have approved a definitive merger agreement, which represents a transaction value of $6.9 billion for BJs based on the closing stock prices on August 28, 2009. This agreement represents a share price premium of 26.9% over the frothy closing price of BJs’ stock on August 28, 2009. Under the agreement, Baker Hughes will be coming to BJs’ stockholders with 0.6969 shares of stock and cash of $0.69 in exchange for each share of BJs common stock. Upon the happy ending of this merger agreement, current Baker Hughes shareholders will own approximately 69% of the blissfully coupled company.

“This transaction further clarifies Baker Hughes’ top-tier position preference for the global exploitation of unconventional and deepwater reservoirs,” said Chad C. Deaton, Baker Hughes Chairman, President and Chief Executive Officer. “BJs’ broads are an excellent addition to our portfolio by adding the services, technologies and talented people that are key to helping releasing the value in our reservoirs. It will better position us to thrust forward for international growth and compete in the cut-throat pressure pumping market. Although in the past I have said I would never pay for BJs, this one was too good to pass up.”

Baker Hughes expects to realize annual pressure pumping cost savings of approximately $75 million in 2010 and $150 million in 2011 as it eliminates dry-hole blind date costs, consolidates booty-call marketing efforts, and further rationalizes playing-the-field costs. Baker Hughes expects the combination to be immediately accretive to earnings per share and other easily manipulated metrics.

BJs Chairman, President and CEO Jill Stewart said: “We are very pleased to be offering our services to Baker Hughes and negotiated hard to maximize the consideration paid for our platform [stripper heels]. Their offer blows all the other offers…out of the water.”

Shareholders of Baker Hughes should note Barclays Capital or J.P. Morgan Securities did NOT act as financial advisor or render a fairness opinion in connection with this transaction, so the risk of overpaying for BJs has been significantly mitigated. In addition, the definitive merger agreement does not appear to contain any major gaping holes because Vinson & Elkins LLP were NOT retained to provide legal counsel or investigate management-controlled limited partnerships.

Conference Call

Baker Hughes and BJs have scheduled a joint conference call. To access the call, please contact the conference call operator at 1.866.637.7128, enter your corporate credit card information, and indicate you are interested in connecting to the BJs discussion. You must be 18 years or older to make this call. Management will provide a brief introduction of the transaction, explain what they are or are not wearing, and then begin the Q&A portion of the call. Please download some materials from the web (Is She Filthy) prior to the call to increase the efficiency of the discussion and ensure your phone on is on mute prior to any heavy breathing.


Cephalopod Valuation under SAAP

Submitted by user Bean Counter

Long or Short Capital LLC (LoSC) has consistently maintained a long position in the Cephalopod Index (C.I.). Through anonymous tips and other sources (we believe that they are coming from the recently retained legal counsel of Pleb due to his jealousy in not getting into the C.I. early enough), Bean Counter Associates (BCA) decided to review the valuation of LoSC’s investment in C.I. according to SAAP, which calls for the value to be recorded at Lower of Cost, Market or Whatever We Say (LCMWWS).

During our analysis, we were tempted to recommend a write-down in the valuation of the holdings, just to shake things up a bit and to reflect the now-public knowledge of the squid invasion, which will drive up squid casualties to beer batter and lemon wedges. However, we then discovered that the valuation may be even higher than originally booked, due to a potential jellyfish alliance.

It appears that not only are the squids attacking, but they’ve been able to solicit the help of their fellow aquatic invertebrates in the assault against mankind. This can only bode well for the squid invasion plans as they form a modern-day Axis of Tentacles. Squids will be able to focus their efforts on the Americas, leaving the jellyfish to complete the Asian conquest with only Godzilla standing in their way.

BCA recommends that LoSC book a gain of (perf)*(initial investment) in its C.I. holdings and for all fellow long holders to do the same. This is entirely permissible under SAAP, especially the part where the accountant gets to make extremely subjective valuation calls about things it barely grasps.


The Sewer of Massachusetts

Submitted by user Straight Cash Homie

The Great State of Rhode Island is a glorious place. 90% of all bridges and tunnels are structurally unsound due to large union influence. Roads are a complete mess with massive potholes everywhere. They have the highest income taxes of any state in the union which correlates with one of the highest unemployment rates (last #s were closing in on 13%). Except for Baller to Mega-Baller vacation areas such as Watch Hill, Weekapaug, Jamestown, Newport and the quaintly named Little Compton, all of which strangely have very, very low property taxes compared to the rest of the state. It’s proper name is Rhode Island and Providence Plantations, making it the longest official state name as well as the most resoundingly racist sounding.

More or less, it’s like a little Detroit but with a caustic trashy accent, a product called “coffee milk” which is branded Autocrat, and more Cape Verdeans per capita. So how do we solve the Rhode Island Problem? Do we just purge Providence, East Providence, Central Falls, and Pawtucket leaving the rest a gated community, a solution known as “Connecting a Cutt”?

The problem with that plan is that RI has the strongest third party of any state, a third party who would never lett you “Connect their Cutt.” The Mafia. So that is off the table.

So how do you erect a powerful economy with a powerful shadow party running the show from the champagne room? Sex and its sale.

The Great State of Rhode Island is a “closed door” state.” No brothels per se but whoring (not to be confused with “lawyering”, see whoring (esquire)) is cool so if it happens on a box, or with a fox, in the rain, or on a train, in a boat or under a coat. So long as all those places are enclosed by four walls. Phillip Markoff’s sensual massagecapades (like we said, Never Trust an Off) caused the conception of many prostitution-killing bills in the state senate. But in the greater interest of Rhode Island and Providence Plantations, the Mafia stepped in, and made sure these new “morality” bills were stillborn.

Their next move was to evolve the sale of sex, putting the cherry on top that will allow RI to increase its competitive presence. Starting next month girls ages 16 and up can find gainful employment as strippers in the state. Can you say stimulus package? Who cares what the drop-out rate is if they can pull down 100k per year at the Foxy Lady or Cadillac Lounge. This is a great way to get kids off the streets and into a trade. On the Bob training, if you will.

“Women work” all suffers from the same humped shape. The fields of tennis, wife, and ex-wife all peak in the middle and suffer a rapid decline in earning power thereafter. Stripping is no different. The very short end has little to no value with a dramatic spike years 16 – 22, moderate decline to age 26, followed by a sharp plunge towards the area known as “thirtysomething”. Strippers, their earning power unfairly restrained by laws and so-called “morality”, were prevented from efficiently supplying their perpetually depreciating assets. The Mafia, first by preventing the closure of “the closed door” and later by advancing women’s labor rights, has increased the efficiency of asset allocation in RI and made great strides to put RI’s economy back on the map.

Recommendation: We’re upgrading RI from “Massachusetts’ Backwards Flowing Cesspool” to “Massachusetts’ Sewer Wherein the Skeevy Roger Williams Made His Home”.


Long Chilean Cocaine Producers

Submitted by user The Paleofish

Conventional wisdom has held that the transportation of narcotics requires a suitcase for the purposes of concealment and convenience of carriage. Today we learn that Chilean innovators have thrown convention out the window and created suitcases made entirely of cocaine. Moviegoers and cocaine enthusiasts know that this was basically the plot of Traffic (spoiler alert!).

The benefits of this innovation will trickle down to all of us in myriad ways. Cocaine prices should drop as cocaine trafficking efficiency increases. Instead of carrying merely the cocaine they could fit into a suitcase, they carry that much PLUS the suitcase itself all in one trip! And for vacationing miniballers who agonize over the decision of “clothes or cocaine” when packing for their destination of chioce, they can just bring both in their cocaine case with the addeded benefit of being safe from Johnny law.

I know I’ll sleep easier tonight. What’s next, making people out of cocaine?

Recommendation: Long Chilean cocaine producers; short Bolivia and Bolivian pride; long chile (because it’s delicious).


Piratery Picture Addendum: Swedish Piratery

Submitted by user The Paleofish

Shivering timbers all night longSwedish piratery firms present a compelling investment case. Consider:

  • Online piratery will surely grow by leaps and bounds with a favorable verdict in the Pirate Bay trial. According to Wired, pirates win either way no matter the outcome.
  • Though headquartered currently in Sweden, these pirates can quickly export their piratery services to more hospitable jurisdictions if need be, mitigating most risk of a guilty verdict.
  • The Piratpartiet, a Swedish political party devoted to piratery, is building toward the critical mass it needs to earn seats in the Swedish parliament. The youth version of the party received Swedish government funding.
  • “Golden Age” market operators are increasingly facing public sector competition for looting/pillaging services.
  • Swedish piracy, in addition to its low-cost online model and co-option of the political process, offers wenching assets that offer extremely attractive yields.

Long or Short Capital Audit for Fiscal Year 2008

Submitted by user Bean Counter

To the Board of Directors and Shareholders
Long or Short Capital, LLC

We have audited the accompanying balance sheets of Long or Short Capital, LLC as of December 31, 2008 and the related statements of income, retained earnings, and cash flows for the year then ended. These financial statements are the responsibility of the Company’s management, despite repeated claims that the responsibility lies with TARP, TALF, ALF and various other entities and bailout programs. Our responsibility is to express an opinion on these financial statements based on our audits and to enjoy the frequent perks and privileges that management provided us with by utilizing the suspended dividend payments. We conducted our audits in accordance with the lessor of SAAP or auditing standards generally accepted in Zimbabwe (GAAPIZ). Those standards require that we do absolutely no planning, and that we perform the audit to obtain reasonable assurance about whether the financial statements are printed on some form of paper. Preferably recycled paper, as to appear “green” and encourage further investment. This audit includes examining, on test basis, evidence supporting the amounts and disclosures spent by management in “getting it done.” An audit also includes assessing the lack of principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation to make sure that it “looks pretty.” We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Long or Short Capital, LLC as of December 31, 2008, and the results of its operations and its cash flows for the years then ended in conformity with the lessor of SAAP and accounting principals generally accepted in Zimbabwe (GAAPIZ).

Bean Counter & Associates


Can Lohan Get US Long?

My advice is to take all the money that I blow on cocaine and blow exactly that amount on US EquitiesResearch by Straight Cash Homie appended to Long Chunky Chick Assets:

This research needs to be augmented with the Lindsey Lohan indicator. When she was a coked out whore doing Disney films and being filmed doing guys in her Disney trailer (or bathroom stall) the bull market was in full effect. Since she has allegedly gone to rehab and sworn off the blow (and the men) the market has grown almost as cold as her career.

I propose the only way to really make the economy take its first big stride forward to recovery is to nationalize her and allow bankers to use her as means to rebuild confidence. This would undoubtedly be a highly controversial step but saving our economy is more important than any supposed “moral hazard.” To satisfy the Bailout Stimulus (or B-S for short) conditions on the population at large benefiting from such an investment she can be “taken public” by resale to Club Jenna by Vivid for a huge profit generator in DVD sales and “Club” appearances. It will take a few years to spin her assets back out for public benefit, by that time the coke habit and confidence (along with closely related cousin: The Bull Market) are back full swing!

(note: the public, like bank equity holders, will in no way experience anywhere near the benefits of those in Finance. They will gladly way over pay for what they are actually getting and by that time her risk level will be WAY more “speculative” than an equity traunch of a CDO. We all know the ensuing bull market will cause the irrelevance of risk controls and due diligence so just remember to get her stamped with the AAA rating and it’s a done deal.)

Following on, he submitted the following by electronic correspondence:

Lohan, 22, went on a bender after a Beverly Hills court issued a $50,000
warrant for her arrest for a probation breach
. She partied at JACK NICHOLSON’s Hollywood home until 4.30am.

Given my prior posts regarding the correlation for Lohan debauchery to the market, partying with Jack Nicholson has to be a very encouraging sign.

Recommendation: While technical-focused traders are looking for evidence that the recent rally will be sustained, the Lohan indicator is pointing Very Long, an upgrade from Half Mast.. The Lohan indicator is still the red-headed stepchild of indicators, but we recommend hitting that bid.


Do Charles Tyrwhitt shirts destroy shareholder value?

Submitted by user KB

A geographic information system correlation analysis

Fact: Charles Tyrwhitt New York City store #1 is located at Madison Avenue & 46th Street, on the ground floor of the ex-Bear Stearns corporate headquarters

Fact: Charles Tyrwhitt New York City store #2 is located at 7th Avenue & 50th Street, on the ground floor of the ex-Lehman Brothers corporate headquarters

Fact: Bear Stearns is toast

Fact: Lehman Brothers is even toastier

Discussion: While further research is required to determine the exact linkage between Charles Tyrwhitt shirts and recent examples of the massive evaporation of shareholder value, the correlation trend is undeniable. Potential catalysts for Charles Tyrwhitt based shareholder value evaporation include bank risk officers spending their afternoons perusing between 100s of shirts in various cuff, collar, and color/stripes combinations instead of properly valuing CDO securities, an “uppity” British attitude permeating the entire building like the smell of a “5-dollar footlong” from Subway left to rot hidden inside the desk of your work nemesis, or some other, more sinister reason. Our crack team of CFA-certified researchers in Mumbai will stay up for the rest of the month running numbers to further isolate the direct causation between value evaporation and Charles Tyrwhitt, so please look out for our next research blast.

Recommendation: Short anything with a geographic proximity to Charles Tyrwhitt.


Kenyan Investment Scam on Capital IQ

Submitted by user JS

This is actual e-mail I got sent via Capital IQ, completely unsolicited. I work for a large public mutal fund company. The next note will be one asking me to cash a check for him for $1 million dolalrs…

Hi,

I am writing to enquire whether you’ve had a chance to look at our equity research notes uploaded on Capital IQ. If you’ve not, kindly take some time to look at it or, if you prefer, I could email then to you directly.

Our firm is an investment bank, member of the Nairobi Stock Exchange, in Kenya. We are among the leaders in corporate finance, research and brokerage.

We could work with you to identify and unlock value for your funds right here in our market. Our market currently has attractive bargain opportunities, and being a frontier/emerging capital markets presents portfolio maximization advantages as follows:

(i) Largely uncorrelated to developed world capital markets

(ii) Driven by the pace and momentum of economic development in the economy: which has a very long way to go.

(iii) Listed stocks are in the very strategic and high-growth sectors of the economy whose growth trajectories are much higher than general economic growth rates.

Kindly get in touch with me to explore how we could incept beneficial relationships between our two firms.

Kind regards,

———————————–

[Redacted]

[Redacted] Investment Bank Ltd

[Redacted]

Nairobi, Kenya

Tel: [Redacted]

Cell: [Redacted]


Are the Headwinds Really HeadSQUIDS?

User Submitted by A Paleolithic Fish

On the Piratery Corp Inc conference call, I think Crumpacker missed a major point. It seems evident that one external factor is driving both the increase in global warming and the decrease in global piracy. I’m speaking, of course, of the rise of our cephalopod overlords.

Obviously, cephalopods must be behind global warming. As our soon to be VP/chief science expert Sarah Palin tells us, humans have played no part in the dramatic increase in global temperature since the industrial revolution. She understands the obvious motive that Cephalopods have for inducing more warming: higher sea levels. How better to expand squid market share than by increasing the size of their domain? When manhattan sinks beneath the waves, cephalopods will laughing all the way to the (undersea) bank.

Of course, squid have been directly involved in the vast decline in piracy over the past hundred years. If ‘Pirates of the Caribbean 2’ taught us anything, it taught us that. By eliminating one link of the supply chain (from freighter->pirate->squid to just freighter->squid), cephalopods are realizing tremendous efficiency gains that show up in their topline results.

Recommendation: Short Piratery Corp Inc, long SQUD. They promise to eat their shareholders last.


EFFIN FDIC

Submitted by reader Matthias

Given the “consolidation” in the banking space that has started with IndyMac, the person that looks to become the heir of the U.S. retail banking industry, is FDIC Chairman and future Chief Holder of the Bag (CHB (disambiguation, this is not a reference to Dan Shaughnessy)), Sheila Bair. But who is Sheila Bair?

Per the FDIC web site, her background is in authoring children’s books, which undoubtedly will come in handy, as she explains to the depositing public the finer points of what exactly is NOT covered by FDIC insurance. The trouble is, the original story of “Rock, Brock and the Savings Shock” is just leading the Nation’s children down an ill-conceived path to risky savings, rather than opening their eyes to the prudent possibilities of borrowing.

From the book description on Amazon:

Rock and Brock may be twins, but they are as different as two twins can be. One day, their grandpa offers them a plan-for ten straight weeks on Saturday he will give them each one dollar for doing their chores. But there is a catch! Each dollar they save, he will match.

Rock is excited-there are all sorts of things he can buy for one dollar. So each week he spends his money on something different-a toy moose head, green hair goo, white peppermint wax fangs. But while Rock is spending his money, Brock is saving his. And each week when Rock gets just one dollar, Brock’s savings get matched. By summer’s end, Brock has five hundred and twelve dollars, while Rock has none. When Rock sees what his brother has saved, he realizes he has made a mistake. But Brock shows him that it is never too late to start saving.

Contrast this with the more recent thinking coming from CHB Bair:

The FDIC’s seizure of IndyMac has given Ms. Bair the ability to put her strong views into action. She has complained that lenders weren’t moving fast enough to help borrowers with troubled loans move into more affordable mortgages and avoid foreclosure.

Last October, she shocked mortgage servicers, investors and many in Washington when she pushed lenders to freeze introductory interest rates on certain high-cost loans to protect borrowers from unaffordable mortgage payments. As foreclosures snowballed, her plan attracted more attention. In December an industry coalition agreed to freeze interest rates for five years for certain borrowers who qualified.

Ms. Bair was pleased, but kept pushing. She argued for more, bigger government action. This spring, she proposed a $50 billion government-loan program that qualified borrowers could use to pay down a portion of their mortgages.

Recommendation: I think it is time to tell the real story of Rock and Brock. The one, where Brock puts his money into an FDIC insured savings account, while Rock asks his friend Kerimov to hook him up with some later-untraceable source of leverage, investing the proceeds in Russian oil assets. At the end of 10 weeks, Brock’s savings bank is kaput, wiping out most of his savings. Over the same period, Rock’s oil assets have doubled, which leaves him with enough cash to purchase the operating assets of Rock’s S&L, after negotiating a free put from the Fed. And a Ferrari Enzo.


Baby Farming

The following is an actual User Submitted email, possibly a request that we generate such a report

Subject Line: Cutting edge Bio-Tech Opportunity: Potential to make a killing.

Industry: Baby Farming

Need help evaluating the PVGO of the industry.

I suspect the “plant” needs to be located pretty close to both India and China from a raw materials acquisition stand point. With live cargo the risk of dead-loss via ocean freight and air transport is too costly. Please include possible suitable locations for the facilities (Andaman & Nicobar Islands?). Also, please discuss the perceived need to capture advantages in avoiding costly American and European regulatory environments.


EBITDAGSAC: A Guide to Cash Generation for Bankers

Submitted by reader cjm in response to Earnings Before Everything

Many have noted that EBIT is a bad measure of a company’s ability to pay down debt because it includes abstractions like Depreciation and Amortization that aren’t really cash expenses. Hence, EBITDA.

But why stop there?

Your Sales and Marketing team are bounty hunters by blood; let them sharpen their hunger a little.

Thus, I propose EBITDAMS.

Of course, I am about to outdo myself. Aren’t General and Administrative expenses highly theoretical at the end of the day? Is Cindy in accounting, with her two plump mortgages, really going to stop coming to work if you don’t pay her for a quarter?

Thus, (say it with me) EBITDAGSA.

What about COGS, you ask? The power of my theory is rivaled only by its subtlety: pay your vendors in stock options. (for the novitiate: options are a kind of theoretical scrip, not dissimilar from Camel Bucks, Mexican pesos, or Monopoly money.)

Thus, EBITDAGSAC.

By this transformative metric, no business can reasonably be said to be too expensive. It’s like beer-goggles for acquisitions; that 40 P/E heifer with acne scars is a waifish 1/1 cindarella after a few pitchers of EBITDAGSAC.


Satan’s Sinergies

Submitted by reader MGW

The vatican has issued a new list of seven deadly sins. The updated sins include:

  1. “Bioethical” violations such as birth control
  2. “Morally dubious” experiments such as stem cell research
  3. Drug abuse
  4. Polluting the environment
  5. Contributing to widening divide between rich and poor
  6. Excessive wealth
  7. Creating poverty

Recommendation: The publication of these new sins has led us to upgrade all of the firms listed in Satan’s Portfolio to date from “Yes” to “Double Down”. As these firms surely commit at least one of these new sins, we expect they will realize significant previously unbudgeted “sinergies”, boosting valuations across the whole class.

Also, we are downgrading Wall Street firms to “Manual” down from “Spit” in light of the fact that they appear to be reformed sinners, the kind which have no place in Satan’s portfolio. Though they once “contributed to the widening divide between rich and poor” and created both “excessive wealth” (think Stephen Schwarzman) while also “creating poverty” (think everything they do to other people who aren’t either them or Stephen Schwarzman), their recent sub-prime losses have resulted in them actually narrowing the divide between rich and poor while destroying a whole lot of excessive wealth.


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