Long or Short Capital

Investors think Overstock (NASDAQ: OSTK) CEO Patrick Byrne is crazy. That’s why his ecommerce company trades at a 0.3x price to sales ratio while Amazon (NASDAQ: AMZN) sits at 2.3x.

Well, here was an email from the IR from last week: Overstock Appoints James Joyce to the Board of Directors

I am flabbergasted. I mean, when people are questioning your sanity, the ideal response is not to appoint a poet and author from the EARLY 20th century. Is this the man to turn around a troubled internet retailer?

Recommendation: Short OSTK; with James Joyce behind them, it will be almost impossible to invest in OSTK without an accompanying guide to help you understand. This will severely and negatively impact demand from institutional and retail investors alike, who may claim “We love OSTK! We think it’s one of the greatest stocks ever!” but actually do not hold any OSTK in their portfolios.

CIBC May Take $4.1 Billion Writedown, CIBC Analyst Says (headline has changed but the original was as we laid out). This just speaks to credibility of CIBC’s (NYSE: CM) equity research department!! ….or the fact that their equity research department just got laid off.

Recommendation: Short the employment status of anyone who downgrades their own firm’s stock; double short any company who puts their employees in a position where they would have to do so.

Is this a company that missed earnings or the index of the largest country in Europe?

Source:Telegraph.co.uk

So your fund is down double-digits, the first number is a 1 if you’re lucky, and you are one more -3% day away from getting a margin call from your friendly brokerage house which has it’s own balance sheet disaster because of its in-house, levered long ‘hedge’ fund. You’re starting to think it’s just not worth it anymore and that the easiest, quickest way out is just to end it.  Put yourself out of this misery and give your wife/kids/fellow mini-ballers the insurance check they deserve. But you have to ask yourself: Do you really want to go out the easy, painless way? You’ve lived your whole life as a flashy, jet-set, new money rock star and you should go out with similar flair. Our top ideas for how to end it with a flourish that says “I was here and I got IT done”:

1. Tie a Bloomberg screen to your chest and fight a bull ’til the death. If the markets get worse it’ll see red and you’re toast; if we bounce then you’re saved and you could say you fought a bull with nothing but a Bloomberg terminal and won. HUZZAH! Plus there’s symbolism if you die by bull, I’m not sure what it symbolizes but it’s highly symbolic.
2. Chain yourself and a woodpecker to your desk. Train the woodpecker to peck the sh-t out of you every time he hears the words “we’re selling off” from your trader. This is advantageous because woodpeckers can’t be prosecuted for murder in most states (IANAL).
3. Put a gun in the ear piece of your phone. Then do an update call with a highly cyclical company that has consumer exposure and oil as a big cost (like I don’t know, an airline) and every time the retard IR guy tells you “we haven’t seen any weakening in demand yet” shoot yourself in the head. Extra points if you figure out how to get the gun connected to your wireless earpiece via Bluetooth.
4. Make a list of all the shorts you pitched in the last year. For every one that is down more than 20% from where you pitched it pull out one hair (if you are bald – go pubic). When you run out of hair scream and jump out your window.
5. Tell your mom if she calls you one more time and says “every time I read about the markets going down I think of you, are you doing ok?” that you are going to put an ice pick through your eye. Then buy an ice pick and wait for her to call you.
6. Apply online for an associate job at an investment bank. Believe it or not this will kill you, guaranteed.

Host: why does Ambac still have AAA rating?
Cramer: BECAUSE THE TRUTH IS TOO PAINFUL.
-Jim Cramer in this CNBC video

Past Quotes Entirely Relevant to Investing

…when you can’t remember what your base salary is but know that it’s just enough to cover your expenses.

A few mini-ballers went skiing over break and met some stoners in the gondola who taught them all some coloradical ski lingo. Of course the mini-ballers were enthralled with this new vocabulary and proceeded to overdose on the new found choices piece of diction. A brief guide in case you want to “make some convo” on the lift this year.

Shred the gnar – ski/ride in a totally sweet way. “Yo bra, we shredding the gnar today or what?” (can also use “shred the gnar-gnar” for additional emphasis on how much gnar you intend to shred)

Gnar-buckets (n.) – the receptacle for the gnar after you shred it. “Bra, I filled up like 6 gnar-buckets working my boards on that glade”

Hit the freshy pow-pow – Ski/ride in new-fallen snow. “Wake up kid, you looked outside yet? We’re gonna totally hit the freshy pow pow today!”

Sesh it up – definition unknown but if asked this the answer is always “yeah man”. “Did you sesh it up that time?” “Yeah man.”

Over-Under – a game skiers play whereby one skies under the other’s legs. “Dude over-under looks kinda gay but it’s actually pretty gnar”

DreamWorks press handler: Terry Press
TomTom spokesman: Taco Titulaer

1. Become Fed Chairman
2. Lower interest rates until you create an asset bubble. Hold them low until stagflation is in the air and a real estate bubble is floating
3. Stop being Fed Chairman and release a book on how you didn’t do anything wrong and have no regrets. If possible, time it perfectly with the worst real estate market in generations
4. Join the hedge fund which has profited more in % and dollar terms than anyone else has from your mess (which you didn’t create)
5. Build a platinum statue of your muse, Ayn Rand, and sleep with it every night

It also helps if you are mostly unethical.

Addendum: Look at this quote from Greenspan from the WSJ’s Real Time Economics:

“Q: All three of your clients — Pimco, Deutsche Bank and now Paulson — were bearish early on housing and mortgages. Is there a connection?
A: I hadn’t [noticed] until you just raised the issue.”

Greenspanspeak is code for self-serving disingenuousness.

SARS is trading near all-time lows. It’s been dead money for a few years. Our analysis indicates that a resurgence is due and would lead to an absolute killing for longs, especially when you consider the potential for investor sentiment to become infected with exuberance when institutional money flows in. We think it is highly likely that SARS will really take flight in 2008; don’t be surprised if SARS stock rises so fast you don’t have time to catch your breath.

Recommendation: SARS is raised to “Unhealthy (in an awesome way) Returns”; Avian Flu is maintained at “Ready to Take Flight”. In 2001, we lowered Mad Cow from “Temporary Insanity” to “Zoloft Level Returns”, a rating we also maintain; still no reason to go crazy (yet).

Here’s an actual email from my trader Thursday:

Bernanke says 2008 outlook worsened, risks “pronounced”
Bernanke says housing demand “weakened further”
Bernanke says Fed “paying particular attention” to housing
Bernanke says Fed to monitor inflation, price expectations
Bernanke says job deterioration would raise spending risk
Bernanke says Dec job data “disappointing”
Bernake says additional policy easing may well be necessary

Market moving higher, Dow +.42%, Nasdaq +.29%, S&P +.77%

Let’s summarize. Bernanke says that the economy is utter crap. The market interprets these comments to mean the Fed will cut rates. The net result is a market rally. So what can we learn from this episode? Investors only care about one thing: the direction of interest rates.

Therefore, I propose a new Fed Model. From now on, the Fed should cut 25bps at every meeting. Forever. Once this strategy has been announced, and investors can bank on continuous interest rate cuts, the markets will absolutely rip. In fact, the Fed can simultaneously solve the US debt problem by buying S&P futures before its announcement. Last time I checked, there’s no law against the government itself inside trading.*

*Of course, I’ve never checked so who knows.

“Pro forma”. From the latin, meaning “lawyers jerking themselves off.”
-Detective McNulty from The Wire

Past Quotes Entirely Relevant to Investing

This exchange at Dealbreaker between “girl” and “1-2” got me thinking. By way of background, “girl” and “1-2” had a flirty back and forth with “1-2” putting drinks on the table and girl unexpectedly accepting…and then both reiterating they were serious.

I assume he will show, in the end, no matter what, as he is a guy. But will she show? And what can we deduce about her attractiveness based on whether or not she shows up?

If she doesn’t show up: there is a 32% chance she is really a dude, a 32% chance she is not attractive and doesn’t want to put herself out there, a 25% chance she is average, a 10% chance she is a complicated computer algorithm designed by Russian hackers to add spicy comments to web sites, and a 1% chance she is a smokeshow.

If she does show up: she has enough confidence that her floor would be a 4.5. I’d say there is a 61% chance she is a 6 (pro forma for women in finance, that’s a 9), 8% chance she is below that, 24% chance she is legit hot, and 7% she is a complicated computer algorithm with holographic actualization technology designed by Russian hackers. She isn’t likely to be too hot, because hot women don’t have to meet anyone on the internet when they can meet them…..anywhere.

Distilled to the bottom line
No show: 4 with faux spunk
Show: 6 with genuine spunk

Armed with this, should “1-2” continue his pursuit of drinks? And based on what “1-2” decides, what should “girl” infer about “1-2″…should she continue her pursuit of drinks?

Recommendation:
Screw Game Theory. Literally, screw it.