Long or Short Capital

Topher Cox, head of the SEC and also a Jedi knight, has issued an order aimed at crushing the short-sellers and SITH lords who are trying to destroy the GSEs and some of the major investment banks. That order is the requirement that a trader must pre-borrow shares before shorting certain stocks.

SEC Chairman Christopher Cox said the SEC would institute an emergency order requiring any traders to pre-borrow stock before shorting Fannie Mae and Freddie Mac, the embattled government-sponsored entities that own more than half the nation’s mortgages. It would also apply to the stocks of Lehman Brothers, Goldman Sachs, Merrill Lynch and Morgan Stanley. The order is a near-term fix and will expire in 30 days.

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Wall Street has been calling for the SEC to address short-selling, which some believe is contributing to market volatility and could be used to manipulate shares of financial stocks.

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Under current rules, a short-seller must locate shares to borrow, which are later replaced with stock bought at a lower price. Some market watchers have been concerned that traders were borrowing the same shares from the same lender over and over, and driving down stock prices.

Recommendation: We’re sure that this regulation is very important and will fix all the underlying problems. The root of everything isn’t awful management, poorly calculated risk assumptions, no-no, just like with Overstock (NASDAQ: OSTK), the real problem is that the stock price is low and that’s due to market manipulation and that large Death Star that the market manipulators have been using to target certain financial stocks. Christopher Cox, you are the winner of the esteemed Patrick Byrne Award for Fighting Market Manipulation.

Be sure to pre-borrow Christopher Cox shares before you short him.

In my family, it has been a masculine tradition to keep logs of economic thought and financial analysis since the days of Ancient Rome. I will from time to time share with you relevant passages from these Legacy records.

From my forefather, Tupac Huayna Madacagalu (relayed through our familial oral tradition):

Dealing with Inheritance

Death is a very tax inefficient occurrence. You die then your estate gets devoured by Quirsatec, The Great God of the Levy. This has been THE great financial planning quandary of my time as Emperor of the Inca Empire. And I think I solved it.

Bundled up on a crisp June night, a pan flute filling the air with its melodies, I drank chicha and pondered tax efficient solutions to the death problem — what can we do to best minimize estate taxes? And it hit me, like a great bolt from Apocatequil:

I will never die and thus never bequeath my estate and also never pay the taxman any goods.

This will likely require some alterations to our belief system, but as ruler, that is all in the game.

As I thought later, I realized the genius of my own genius. Not only would I minimize taxes and not die, but I would ensure that my offspring were properly incentivized to go out and conquer for themselves, for otherwise they would have nothing and they would likely be thrown off the cliffs into the depths below with nary a single coca chew to soften the blow when the state falls apart around them! Oral Note to self: This is also a great opportunity to create a post-mortem fashion and maintenance start-up and produce crazy profits.

Mac’s are dominating the news, whether it be Freddie, Indy or Apple. But investors are understandably confused as to how to look at each Mac, and whether being a Mac is a good thing or a bad thing for a potential investment. Here is what our research indicates.

• IndyMac (NYSE: IMB) — Bad, too artsy sounding and unloved by the masses. Short
• Freddie Mac (NYSE: FRE) — Good and bad. Good that it has the full force of the Govt behind it; bad that it has the full force of the Govt behind it. Other things that have the full force of the Govt behind it include Iraqi Peace, Afghani 20th centurydom, the US Dollar and the USPS. You want to own the equity in that entity? Short you
• Fannie Mae (NYSE: FNM) — An honory Mac, see Freddie Mac but add in transsexual identity issues. Short the LGBTAMac as well.
• Big Mac — Delicious as always and digestion proof which allows it to conveniently be reused; this quality makes the Big Mac recession proof. Long
• The Daddy Mac — Totally dated…NOT. Just kidding, it’s very dated…NOT. No I mean it, it’s dated. Seriously. Short the Daddy Mac and NOT
• PennyMac — A startup financial entity created by BlackRock and Highfields to make distressed plays in the mortgage space. The penny let’s you know that this is a Mac that gets it done and at a good price. Long
• Mac computer — A PC that has been marketed well enough by Apple (NASDAQ: AAPL) to command a 20-30% premium for being pretty and having spent time in Steve Jobs magical fallopian tubes. Long
• Mac zealot — like a Mac computer minus the PC and plus a defective person who loves a company more than any person in their own life. Wish they spent time in Steve Jobs womb. Love to wait in lines and buy consumer products as they “Think Different” together. Short
• GMAC — Four parts Freddie Mac, Three parts depreciating collateral, Two parts auto, Five parts GM (NYSE: GM) equals Short.

In Three Days of the Condor, when professional killer G. Joubert is asked “Why” he kills people for a living:

I don’t interest myself in “why”. I think more often in terms of “when”, sometimes “where”; always “how much”.

Past Quotes Entirely Relevant to Investing

Do you ever have one of those days? When you feel like you might just default at any second? It could be spurred on by a liquidity crisis, like Ford took away your factoring, or has contractual price downs that are killing your margins and is ordering less volume to boot, and your revolver is maxed out, and good luck raising any more money in this market. Suffice to say, you’re regretting your decision to be a consolidator in the auto supplier space. Or it could be a liquidity crisis where you had one too many jaeger bombs and the smell of your toilet indicates you may have also had too much tequila, but you have no memory of having ANY tequila. Either way, you could default at any second and you don’t like where things are headed.

That is when you need to restructure and find yourself a personal CRO. What can he strip out? What can he improve? Well, well, you’re in store for it. You spend your weeknights doing what? Why don’t you use lean manufacturing while performing your job? You should consolidate your suppliers. And lose that contract with that girl, you know the one, she negotiated terms at the top of the market and you find yourself spending significant capex to maintain your supply of her goods, goods which are worse and worse and of which she is putting out less and less.

I found myself at this point, on the veritable verge, and I needed outside help. Luckily, Long or Short Capital has a very generous and unique health package that allows its employees to be extremely healthy and notably more efficient. You think the firm with the SAAP based financial results doesn’t have generous fringe benefits? Come on!

I have just brought my CRO in (pictured above) so he is busy getting getting dug in and up to speed on me. I will update as he begins producing actionable recommendations.

Lam Sai-wing is the head of Hang Fung Gold Technology, a retail jewelry company based out of Hong Kong, famous for its Swisshorn Gold Palace. The WSJ caught up with him to talk about his golden romper room.

Corporate speak:

Building a gold toilet, I realized…would be like an investment, plus we could let people see it for an admission fee, and we could use it to launch our brand. [Besides gold prices were so low they could only go up; buying gold at $200 an ounce would hedge against inflation]

-Lam Sai-wing

Translation:

This was the perfect way for me to stoke my ego plus it was a sizable risky speculation in a commodity which, as a retail jewelry business, is not what we should be doing — another reason it was a great idea! I knew that if gold went up, I would look like a genius and likely get a nod from the Wall Street Journal who eats up these zany stories; if gold went down or stayed the same, I would look like the guy with the crazy big ego but I’d still be rocking a gilded room. A classic win-win situation for me, win-lose for the shareholders. It’s all in the game.

Corporate speak:

The toilet and the Guan Yin statue are the most valuable pieces[.] As for the toilet, that’s the cornerstone of our company[.] It’s an icon. It will never be taken apart.

-Lam Sai-wing

Translation:

As for the toilet, that’s my throne. It will be taken apart if the price is right.

Freedom is the last, best hope on earth.
-Abraham Lincoln

Past Quotes Entirely Relevant to Investing

No man loves America more than Neil Diamond and no man wants your 4th to be better and freer than Neil does.

Except the staff of Long or Short Capital.

In its recent presentation to investors, Yahoo correctly pointed out that Carl Icahn has not had much success in recent battles with corporate management. In fact, his track record looks miserable. But they made a key error in their analysis. Where is Yahoo on this list? As one of his largest and most public failures, shouldn’t Yahoo be included in the list of his underwater investments?

Highly controversial for racial and cultural reasons, and that’s likely the only reason why it’s unpublished in academia, the Mexican Woman Theory of Women suggests that once a woman locks a man down, things change dramatically, namely into a pear (Spanish Editor’s Note: pera en español, muchachos!). Women in such situations turn into pears, or at least change their shape to be more pearlike than before. My body of research canvassed all the women I have seen in my life who are Mexican, or whom my naivete and racial insensitivity suggested were Mexican, so they might not all technically be Mexican, but for all intents and purposes, I will consider them to be daughters of Mexico.

The evidence suggest that there is a startlingly high number of attractive Mexican women between the ages of 18 and 24 (seriously, they are really hot and seem awesome in every way and I have no way of accessing that market legally domestically). But there is also a huge amount of pear shaped not attractive Mexican women aged 27+.

Why the discrepancy? What happens? Simply put, women require manipulation (and incentives) too.

Recommendation: Keep them on their toes. Literally, it’s great exercise.

Dear Yahoo!,

About a month and a half ago, we provided you with a free report on how to increase your value. Since then, you have not followed any of our suggestions. In particular, our suggestion #8 — “Let the company be bought by Microsoft (NASDAQ: MSFT) at a 50% premium to YHOO’s closing price before MSFT’s February bid” — went unheeded.

Since then, you have chosen to take a few other actions including:

• Rebuffed Microsoft.
• Completed another reorganization (3 in 6 months?) to consolidate power fully and finally under Sue Decker. Sue Decker’s previous experience includes running the finances of Yahoo at a time when most people now agree it massively under-invested AND flubbed chances to acquire numerous of the current, leading internet companies. Prior to that, she analyzed newspapers, which are now effectively dead.
• Said re-org also consolidated power underneath Decker’s #2, Hilary Schneider, who also has a lot of experience in the dying newspaper industry. For reference, here is the stock price of McClatchy, the company which purchased Hilary’s alma mater, Knight Ridder. Her experience with a static, dying medium will surely have prepared her for the dynamic environment that is online advertising.

• Bored investors with your inane ramblings from the Chairman to the point where no one actually cares what you say. In fact, it’s likely that no $30bn company has ever succeeded in having investors treat its Chairman’s letters like viagra spam before. No I don’t want More Yang, [Mark as Spam].

However, I must give credit where credit is due. Congratulations on:

• Creating one of the fastest growing groups on Facebook: Yahoo Alumni.
• Finally getting the attention of internet community centers like Techcrunch, where they have set up special pages to track the departures of your executives.

Had we known here at LoS that this type of success was possible, we would never have issued our initial recommendations. Our apologies for failing to see the bigger picture.

Sincerely,
LoS

This headline teaser caught my eye this morning on WSJ.com:

“Russian Investor Backs Fortis

Fortis is tapping a Russian billionaire for a $630 million capital injection, a sign that banks are looking beyond Asian and Middle Eastern investors for help shoring up their shaky finances.”

1. It seems more apt to say that the Russian billionaire is the one doing the tapping, right before he injects $630 million in liquidity.
2. A Russian billionaire is really looking far beyond Asian and Middle Eastern investors. Totally different beast. Instead of being an extremely wealthy oligarch in a corrupt totalitarian state whose wealth is 100% dependent on commodities, the Russian billionaire is a wealthy oligarch in a corrupt tsarist state whose wealth is 100% dependent on commodities.
3. A Reuters report has attributes these comments to Fortis (Brussels: FORB) chairman Maurice Lippens on the overall transaction: “Fortis expects no more capital raising.” According to our proprietary translation algorithm, that statement indicates that investors should expect the raising of significant additional capital.

Recommendation: Read the linked Wikipedia article on the Russian investor, Suleyman Kerimov, it’s mindblowing. His nickname is “Russia’s Richest Civil Servant”, the source of his significant wealth cannot actually be determined and he has a yacht named “Ice.” Oh and he is also tapping the oligarchbait above (with his liquidity).

I don’t consider myself a home-run hitter. But when I’m seeing the ball and hitting it hard, it will go out of the park.
-Ken Griffey Jr.

Past Quotes Entirely Relevant to Investing

In light of the fact that Carl Icahn has recently begun blogging, we thought we should point our reader in the direction of the time Carl tried to take us private and started his own blog (formerly located at liquidiconcapital.com).

Recommendation: Historical perfomance may not guarantee future performance (or so some claim), but fake reality can be a useful guide to future reality.