Long or Short Capital

Dear Subscriberholders,

You may be aware that something is “going on” in the markets. That something is that we squandered all your potential dividends due to what can only be described as The Perfect Storm of Perfect Storms. We’re sorry. We thank you for having faith in us, and our models indicate that if it were not for The Perfect Storm of Perfect Storms, then we would have returned to you 30% per annum, so you should feel confident that you made the right decision according to invest with us according to our models and also to our models.

Now, many of you may be saying “Aren’t you savvy investment professionals, shouldn’t you have, y’know, know better.”

To that we say, “Yes, but also no.” In “The Perfect Storm”, George Clooney captains a ship that catches tuna or red snapper or whatever, and he can make lots of money in a short time doing it. But if George Clooney, George Clooney’s brooding good looks, and George Clooney’s amazing hair, are unable to return a single Gloucesterman to shore in the face of just a single The Perfect Storm (spoiler alert they all die), what hope is there for Long or Short Capital Management in not destroying all subscriberholder value in the face of The Perfect Storm of Perfect Storms?

What hope indeed,
Long or Short Capital Managment

A journalist female asset asked us our opinion on “who, in the current financial climate, do you think is in the best position: the high-end wife, the high-end girlfriend or the high-end hooker?” as well as “their relative vulnerability is in relation to the vulnerability of the Wall Street honcho who might be their husband, boyfriend and/or client?” The following was the research report we created:

Just to clarify, our definition of “High-end” means “extremely firm buttocks and/or thighs that do not touch while standing”.

High-end Wife: Her position is weak because, frankly, she is a status driven nag. As Man’s ego falls commensurate with his portfolio’s value, Man will tire of her act and reallocate his assets towards strange to try and offset his ego loss. The High-end Wife is likely to adopt a simultaneous “flight to quality” strategy or, in layman’s terms, “pull a Jackie O”. But she lacks the understanding of markets to know that this is a GLOBAL financial and, soon-to-be, economic crisis, so her Aristole will really be a Raffaello. The availability of cheap, made-to-order Eastern European High-end Wives, further puts pricing pressure on a transitioning High-end Wife, whose assets are more aged and more likely to be in need of a refresh.

High-end GF: Below the high-growth exterior, High-end GFs are mainly naive and prone to huge strategic gaffes despite tactical genius and impressive, but depreciating, endowments of natural resources. Her short term position is strong, because as Man is transitioned from High-end Wife, High-end GF will get a small short-term boost. Considering that Man is likely rich, this will be a very small and very short boost. Given that this boost is purely short-term in nature, this is a classic buy on the rumor, sell on the news situation for anyone looking to invest in a portfolio of High-end GFs. Over the long term, her fundamentals will become identical to that of the High-end Wife, with the exception being that her former role as a mistress weakens her bargaining power with respect to Man in terms of Man seeking out new strange.

High-end Hooker: Her position is strongest and her assets are acyclical. In good times, men are flush with cash and looking for strange but are also less dysfunctional; this leads to an allocation towards a basket mainly consisting of High-End Wives, with maybe a 15% position in High-end GFs and a 2-5% position in High-end Hookers. As markets worsen and/or crisises take hold, Man is increasingly dysfunctional and looking for ego offsets. It also in this time when Man typically contemplates or engages in life restructuring which can entail simple cost saves, like headcount reduction, or even full-on recapitalization, flushing out the junior capital. A successful market-timing Man will typically have a portfolio composed of 60% High-end Hookers, 30% High-end GFs and 10% value High-end Wives when the market is bottoming. As the cycle comes around, the High-end Hooker position is reduced opportunistically, some of the High-end GF portion transitions organically to High-end Wives and the value High-end Wife position is added to with more growth High-end Wives.

As to relative vulnerability, obviously Man will be ok and everyone else will (still) be fucked in a recession. This is what historically has been true according to the data we have. Additionally, the cross-cyclical trend we see is that everyone else will still be fucked.

We have embarked on a new type of analysis which we call “Analytiquation Sans L’Informatione”, which might be french for something but probably is not. Today we tackle Iceland, where our only source is Iceland: When Too Big To Fail Becomes Too Big To Rescue, a link on our favorite Salmon’s blog. We will take the words and comments from that one link and come to investable conclusions without using a single other source of third party data, so that our analysis remains pure and untainted.

Analytiquication Sans L’Informatione: Iceland
Source: Iceland: When Too Big To Fail Becomes Too Big To Rescue

Comment: [Iceland is] fighting powers that they are powerless to fight. It’s like tackling a storm raging in the sea with a teaspoon. The main supermarket can’t get imported goods because they have no currency. The shops are half empty. One of the store managers has advised people to start hoarding. We’re running out of oil. And winter came last night – about a month early.

Analysis: This sounds like panic, and one of the keys to getting out of trouble, even of you find yourself stuck in a fjord, caught below a dyke or being strangled by a pack of bjorks (warning those things may not actually be Icelandic), is not to panic. So do not panic before reading the rest of this comment. Contrarian analysis indicates that if someone says “we’re running out of oil”, it probably means they are not actually running out of oil because they must be aware of how much oil they need so are now appropriately prioritizing it. Like when I used to put pillows on top of my brother’s head, and he used to complain “I can’t breathe JD, stop please!”. Save the words for the birds bro, I know you’re breathing if you’re talking. It was tough growing up an only child.

Comment: This is not right “The shops are half empty” there stores are full Everything is just more expensive and we are not running out of oil, the government will not lat that happen, the government is running thundered of cars, run ships, helicopters,airplanes so they need oil them self so they will not let the country run out of oil. Most of the news we are hearing now in Iceland…well lets say they are not all true.

Analysis: We knew we were right before and that that panicky email was wrong. We were able to use this latest comment in conjunction with our razor-sharp confirmation bias to refute all those who doubted our previous paragraph. This is why analysts need more and more data and deserve to be paid huge sums of money. If we don’t have the former, how can we inundate you with how correct we are, like how I am doing now? If we don’t have the latter, how do we maintain our model girlfriends’ cocaine habits?

Comment: Iceland produce 5% of all aluminium in the world and our mutual fund is bigger than Norways oil fund per person. People forget the fact that we have highest standard of lifing in the world and we will be on the top again next year. There is nothing to fear in Iceland.

Analysis: This does not pass the smell test. Olfactory analysis is key in understanding smaller, niche markets like Iceland. It’s impossible to visit there by plane and very few people have ever even seen an Icelander, so analysts must sniff in the general direction of Reykjavik and glean what they can from the scents. And my Moody’s rated nose indicated that there is no whiff of aluminium. Moody’s rates my nose as a Baa2, which means the implied default rate is only 87%, so you know you can trust it.

Comment: We will see more and more nations literally disappear. Iceland will shortly be returned to wilderness.

Analysis: When the Age of the Cephalopod is upon us, and the Age of Man is at an end, Iceland will be one of the first nations to go, due to its isolated oceanic location and vast volcanic power sources. This comment is right in suggesting that the fall of Iceland may be a catalyst for positioning one’s portfolio for full exposure to cephalopodic plays.

Comment: They’re vikings… Canadians and Americans better watch out, soon there will be a fleet of angry Icelanders landing on your coasts to loot and rape.

Analysis: To paraphrase Robert the Bruce, “you’ve been raped by worse! Now be raped with me!” There are some attractive broads over there, so there really are worse fates. But the truth is, Iceland, it’s too bad you could never rape us…because we would consent.

Recommendation: To summarize, and in summary, do not panic in Iceland or about Iceland, Iceland and the world is not running out of oil, everything is ok, except the fact that Iceland is about to be reclaimed by the sea and subject to, along with the rest of Earth, the rule of giant squid masters, also Iceland can’t rape the US because we have it coming and would likely enjoy it. Invest on that.

I have been stuffing my pillowcases with Krugerrands in anticipation of the bailout bill and the inflation that is surely to follow. I recommend you invest in gold, silver, and guns. Further diversification into mackerel is also desirable. This currency has the benefits of being more liquid(oriented) and tastier than the dollar. Additionally, you can already use it to purchase haircuts, food, and other items and services throughout the US*.

*prison system

Paulson says “[the bailout bill] is much too important to simply let fail. We need to work as quickly as possible. We need to get something done.”

He can’t get IT done, but he thinks we need to get SOMETHING done. That is decidedly NOT getting IT done.

Recommendation: If you are planning to build a CDO where the underlying assets are Hank Paulson Paper, good luck with that. And no, we have no interest in the equity tranche, the AAA tranche or any other part of the structure, thanks.

Dear Hammer Paulson,

I’m sorry Hank, it’s not you it, it’s me. I have been violently ill all morning after playing “donkey races” on Sunday. Tequila, speed and tenacity are at once a great combination and a miserable spectacle. Exclusively the latter the next day. And my puking all over your bailout plan has nothing to do with its merits. It looks great, a good win for you and you should be proud. Seriously, good stuff. Like I said dude, donkeys races. Blame the donkey races. I’m sure I’ll be fine by like tomorrow. Or 2014.

Regards,
T. Market

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.

Sept. 18, 2008 — UK bans short-selling of financial stocks
Sept. 19, 2008 — US bans short-selling of financial stocks, requires reporting on all other short sales
Sept. 26, 2008 — China approves short-selling and margin accounts for first time in order to develop market

Recommendation: Short the US & EU. We are regulating ourselves out of existence while China and the developing world moves in the other direction.

A dark stage, with a single spotlight on Henry Paulson

Henry Paulson: Good morning, ladies and gentleman. My name is Henry Paulson and I run the Treasury. And I don’t mean to make you panic, but if you do not give me a balance sheet that can hold $700 billion on it, and unlimited funding, than the economy will die. That’s right it will die. I don’t mean to cause fear and panic, but those are the only two legitimate reactions you should be feeling right now and you should let those guide you. Let them flow over you, sucking you into my myopic morass which now shrouds my former optimistic obfuscations.

Ben Bernanke: Every other economist disagrees with this proposed bailout but I believe in fear and panic and am drunk on the wine of my new powers. I too must insist that you, the fine people of this country, please give into your fear and panic. It worked in dealing with 9/11, it worked in getting us into Iraq, it worked in re-electing George Bush and now it will work in bailing out this economy. You don’t want it to DIE, do you?

Barney Frank: (Looking disheveled with a bad teen moustache) Blahrm-bram blrankrtrtyc encncmmphphphgh nbmmanana. Bragblahma ththtlthabzzzgh ndragh plghtythmrhm phjalth.

George Bush: I know nothing, if not fear and panic. Trust me, we need this.

Violin solo in the background playing the Vivaldi classic “Short Term Political Cycles Are Mismatched With Jobs Charged With Making Decisions That Have Effect Decades Later”

Congress: FEAR. PANIC.

The Economists: NO!

Congress: FEAR. PANIC.

Wall Street: FEAR. PANIC.

All players dancing on the stage surrounding The Economists who disappear into the floor

A Rational Man: Do we need this?

Henry Paulson: Yes, I need this.

A Rational Man: I said “we”.

Henry Paulson: And I said “I”.

A Rational Man: What will this do? Honestly, I’m a Rational man, thus I have no vote.

Henry Paulson: Maybe, maybe might unfreeze the interbank market.

A Rational Man: But will this save us from recession?

Henry Paulson: No.

A Rational Man: But will this lead to massive inflation?

Henry Paulson: Almost certainly.

A Rational Man: And what about the unknowable second order effects, or third order effects, or x order effects?

Henry Paulson: I ignore them.

A Rational Man: So this bailout is a longshot to do anything positive and it increases the downside risk if it doesn’t work?

Henry Paulson: That is what our math tells us.

A Rational Man: Is this socialism?

Henry Paulson: No, this is necessary.

Some investors consider sales and marketing expense to be a real investment. If a company is building its brand, it’s building its barriers to entry. Now we know why the private equity funds are doing so poorly. Cerberus and Sears (NASDAQ: SHLD) (now Eddie Lampert’s investment vehicle) have been decreasing their advertising spend…their barriers to entry must have come down shortly thereafter. Looking at the top advertiser through, PSAs, I am confident that Government and wish-washy non-profit organizations will continue to grow…their moats are getting larger.

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]

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
-The Bailout Proposal

Past Quotes Entirely Relevant to Investing

Today the US treasury announced they are bailing out the federal reserve bank. They are concerned that the federal reserve bank – after taking over the debt of Bear Stearns, Fannie, Freddie, AIG et al. is “over-leveraged”.  The obvious question is, who will bail out the Treasury?  The answer is paper.  More specifically the “Bureau of Engraving and Printing”.  We are so long the Bureau of Engraving and Printing as we see it as the only financial institution in the country that will always “find” enough liquidity to fund itself.  If you’d like to get long them we recommend you check out www.moneyfactory.gov.  Yes that’s the real name of their government website.  Money doesn’t grow on trees, but you can cut the trees down send them to a money factory and presto pronto prego DINERO!

Recommendation: In any mania, don’t invest in the company that mines the “gold”, buy the company that supplies the “shovels” and “picks”.

AIG (NYSE: AIG) is now a subsidiary of Paulson Inc, because despite being in the insurance business, AIG had a common failing of man — the inability to look within and accurately assess one’s self. But what I don’t get is why AIG didn’t just insure itself. If I were in the insurance racket, the second thing I would do would be to make sure to write an insurance policy for myself. The first thing I would do would be to leverage my expense account into a huge birthday party featuring hookers, blow, ice sculptures and midgets in Sardegna. But the second thing would definitely be the whole insure myself against ever losing money. Actually that would be the third thing. First would be the hookers and blows, second would be insuring my privates, third would be insuring myself against ever losing money.

I mean isn’t that the whole point of insurance? To make someone pay too much so they don’t have to worry about something. Well I figure being AIG, I’d be an insider and be able to cut myself a deal and not make myself pay anything at all for being insured from ever not making money.

Recommendation: If you can’t insure yourself, who can you insure?