Long or Short Capital

Updated 8-8-2006:

What would it take to get you to cheat on Christy Brinkley? The answer is Diana Bianchi, the 19yo woman Brinkley’s husband had an affair with.

Comparable to Mariah Carey, a refined version without the busty PE ratio. Attractive features on the petite side, fit form and youthfulness lead to healthy free cash flow in the intermediate term. While earnings should be relatively stable, the current highly efficient structure will limit margin improvement and limit the upside of this asset’s appreciation. There is tick risk as her smile can be awkward (picture 2) and there will always be an “event risk” loss of youth type event. Also consider that as with any female asset there is always a risk of “the crazy.”

Recommendation: A valuable scarce asset in a heavily demanded market. Long Diana Bianchi but look for an exit point. We also maintain our market outperform rating for Christie Brinkley.

More pics of Diana Bianchi.

The low cost carrier airlines have realized the power of selling to a needy captive customer. They price shots of crappy vodka at $10 each and the typical jackals and scoundrels who populate those flights buy them, as do people who want to drink their way to comfort amidst the tomfoolery. Customers have needs, the more trapped they are, the less price sensitive they become. Businesses can make a killing if they can find a way to get the customer exactly what they want in these situations.

Picture this situation: NYC business man, stuck in an NYC cab in the middle of NYC. There is no way he will make it to that meeting downtown with Skadden Arps, where his boss is waiting for him, judging him, and mentally trimming his bonus by the second. His Thomas Pink shirt feels like a $200 noose and his $ sign cuff-links look more like hand-cuffs.  Stressed, lonely, rich and surrounded by ethnic people listening to bad music – what this man needs is a good hooker. But he’s stuck in traffic, in a cab! What can he do? Where can he go? If only someone could provide him the service he needs then he could just nut right there in the back seat and feel like a man again. Enter the Taxistute.

Taxistutes would drive around soliciting “rides” for targets who would be screened to have high conversion rates to whoring services (men with money, men without money, men with pulses, Charlie Sheen), then, mid-transit they would proposition the customer. The customer would benefit from high levels of anonymity, convenience and deniability (“where were you honey?” “Oh just taking a taxi home from work”).  This would give pricing power to the taxistute. A typical low margin taxi ride of $25+tip and toll from La Guardia to midtown would turn into a high margin $225 + tip and toll with roughly the same cost structure and time (provided that there is both a driver and a fluffer). This will serve to bump valuation multiples for the entire transportation industry and any industry which can put their customer base in captivity. Future markets include airline and train travel, horese carriage rides, and waiting areas at the DMV and the dentist.

We love commenters. Not all of them, but we love some of them, especially those which have our names. One of the many riddles we have solved is how to get more frequent non-spam comments. The best way?

GIANT COMMENTS.

I took the html which controlled the “Comments” link which is appended on every post and made the font twice as large. As for the results, I will let empiriscm do the talking. Here is a chart with the number of comments we had per post before our Giant Comment initiative was undertaken, and after it was fully in place. As you can see, the pro-forma C:P ratio is much larger.

Note that that chart was constructed with Microsoft’s Excel, none of this Star Office/Open Office intern level software, so you know those numbers are legit.

Recommendation: Screw going large, go GIANT.

Few things have been as revolutionary as the mnemonic device. Until the 20th century, modern science and mathematics as we know it were impossible because no one could remember their important rules. With the introduction of LEO-GER, SOH-CAH-TOA, and pimp Roy G BV, scientists were finally able to make breakthroughs such as microwave ovens, VOIP and lasers.

Why hasn’t the financial community applied these techniques to improve efficiency and increase memory? Surely, the use of exponentially increased complexity to memorize simple strings can be seen as potential value-add by banks and investing institutions whose main function is to exponentially increase complexity on simple transactions so they can collect a fee on them. (I’m half tempted to syndicate that sentence and charge you 50bps. Maybe I can interest in you some Long or Short Capital CDS products or our algorithimic trading platform?)

Cutting out the middlemen before they get involved, let’s make your understaning of financial terms more whole with the introduction of JDMDFKIF’s:

EBITDA: As Paulie Walnuts would say “EARNINGS BEFORE INTEREST TAXES DEPRECIATION AND AMORTIZATION…Gives the true picture of a company’s profitability.” A good way to remember what it means is to memorize this sentence. Eff Bitches In The Dairy Air.

ARPU means Average Revenue Per User. Artful Robbing, Possibly Useless. You also get a handy description of the value of this metric.

EPS means Earnings Per Share. How can you remember that as a CFA with an MBA from Kellogg? Easy. Eat Padma’s Salad. She won’t mind, she is trying to lose weight so her parents will find her a husband before she is 30 and she can get out of the banking world and into the kitchen. Samosa!

LFL is a term that is synonymous with SSS in certain situations. In other situations, it is not. The best way to remember LFL is this (letters in parentheses are silent): (L)same (F)store (L)sales.

The beauty of this system is that you can use these mnemonic devices to cut through all the typical Wall Street BS and lingo, and mainline the truth into your mini-baller IV. So if you see this:

Comcast lowered its EPS guidance today on news that its LFL growth had turned negative due to a decrease in ARPU. The company also lowered their EBITDA target to the low end of their previous range.

You know that that really means (translation smoothed for context)

Comcast did not eat padma’s salad today on news that its same store sales growth had turned negative due to an increase in artful robbing, possibly useless. The company also effed b*tches in the dairy air.

Recommendation: Unlock the power of your mind with Dianetics. Increase complexity as much as possible at all times; it is the only way to get simple things done.

I, at least, do not learn from mistakes. I have to learn from successes.

-Peter Drucker

Past Quotes Entirely Relevant to Investing

First of all, in response to reader’s questions, you are right: NOTHING I WROTE LAST MONTH SPECIFICALLY APPLIES TO ZAMBIA. Thanks for writing in. Now, back to the topic at hand.

I had the worst nightmare of my life last night. I dreamt I was going to Harvard Business School. I packed my apartment, said goodbye to my roommate, and left for school the next day. HBS was filled with annoying types, attempting to network their way to a decent career. But the worst part of the dream was when I realized that the only reason I was at Harvard was that I hadn’t killed it in the market during the previous year.
Needless to say it was terrifying.

So I’m in Berlin on the day of the World Cup Final and it’s the busiest day in the city since World War II and I think these people hate money.

I’ve been trying to buy a French jersey:

• Went to big department store but they only carry German jerseys.
• Went to the largest sporting goods store and “World Cup Merchandise Headquarters” but they are closed because it’s Sunday.
• There is no one selling jerseys on the street, only lanyards. The supply demand balance in lanyards in Berlin is completely out of whack; I predict a 300% decline in lanyard prices.
• Went to Nike Town – they are open but they don’t sponsor France, adidas does.
• Went to adidas brand store and they are open but have 0 supply of anything french; they have been sold out for 3 days. I asked if they knew what FedEx was and they said ‘nine’
• Tried bribing a guy on the street with 100 euros for the smelly Zidane jersey he was wearing and he told me I was a typical American trying to buy everything. He told me Zidane hates Americans. I said that’s ok because at least he likes money.

Long: Anyone with a brain and ambition in Europe.
Short: Lanyards

If you want to know what a man is really like, take notice how he acts when he loses money.

-New England Proverb

Past Quotes Entirely Relevant to Investing

Value. Where is it? It could be in an underinvested collection of brands within Unilever; it could be veiled in a sleepy Government run regional waste operation in Montevideo. But could it be under the draping cover of…a burqa?!?

Fact: Middle Eastern women are hot, I know this because I have never hooked up with them. Scarcity, a valuable asset’s best friend.

Fact: Many hot Middle Eastern birds live their womanhood with their eminent hotness unseen by the entire market.

Fact: Competition breeds improvement and keeps firms (and assets) from getting bloated and inefficient. Burqas serve to reduce competition and endow a visual monopoly to one man. Only one man can view the holiest of holies. This limits the upside that a burqaette can experience by staying fit, looking hot and being aesthetically pleasing. Only one man can give her positive feedback, as opposed to the dozens of men who might check her if they could see all of her on her daily stroll to through the bazaar or to H&M.

Once you put what you want to see under the burqa, what you see under the burqa will not longer be what you want to see. I’m talking orca-sized “no longer what you want to see” based on a complicated visual regression analysis which we performed. Essentially, controlling for variables such as shoe size, wealth, age, the addition of a burqa adds approximately 30% to a women asset’s body weight and reduces beauty by 5 hklums. The end result is that burqas serve to control the property rights to a valuable asset but at the expense of the valuable asset’s value.

Recommendation: There is a potential arbitrage opportunity to acquire a burqa-veiled woman asset, remove the burqa, and flip it for 20% more on the spot. Alternatively, an investor could let the natural elements of competition cause her to firm up her shape while spending some capex on a makeover and then flip the asset for approx an 40-50% after 12-18 months. It’s important to do some upfront due diligience, specifically to verify that the asset has strong underlying fundamentals. Further value can be realized by “blonding” the asset.

Here is a sample of an asset as it was at FYE 12/31/05 and how it looks on a pro forma basis.

Let’s just say that while Ken Lay’s life may be trading near zero, but that a death this conveniently timed is no death at all but instead the perfect ruse to escape, fly to Rio for face-changing plastic surgery and a retreat to a lair he built in the caves of the Spanish Pyrenees with $100mm’s he has tucked away over the years. In fact, the Ken Lay that died may not actually be Ken Lay, but instead a genetic doppelganger created with technology from Project Helix. We saw this on Alias one time, so it’s a proven tech.

Recommendation: Alive!

But I should say too that in these rooms just this afternoon such displeasure brought me near to murdering the Sheriff and raping Mrs. Ellsworth. I have learned through time, Mr. Tolliver, and as repeatedly seem to forget that whatever temporary comfort relieving my displeasure brings me, my long-term interests suffer. My proper traffic is with the Earth. In my dealings with people, I ought solely have to do with n*****s and whites who obey me like dogs.

-George Hearst, on Deadwood

Past Quotes Entirely Relevant to Investing

While we believe the trend of humanity, as a whole, is to understand more and more, we believe people have been putting too much stock in their ability to understand things and that this segment of the market is peaking. Recent developments in Global Warming have been hammering this point into our brains, but one need only pick up anything that has macroeconomic analysis or tries to understand the federal deficit, national debt and foreign capital flows to get a sense for our state of Peak Knowing Less Than One Thinks One Knows.

Recommendation: The investing implications of this are both confusing and potentially paradoxical, so we suggest ignoring them lest you create a sucking black-hole of reason. It’s ok to not know something and to admit it, even if you are a climatologist (the latter would probably get you fired from certain financial institutions). It’s even more ok to know that Long or Short Capital understands everything and even has a model for it. We are the exception.

Whatever happens, there are always things you could have done better. You score two goals and you usually feel you could have done better. You score two goals and you usually feel you could have scored a third. That’s perfectionism. That’s what makes you progress in life.

-Eric Cantona

Past Quotes Entirely Relevant to Investing

Every investor loves to believe that he is the second coming of Warren Buffet so I’m never surprised to hear allusions to Buffet’s methods and sayings. At least that was true until I met Richard Ji, a nice, well-intentioned equity analyst at Morgan Stanley. Ji, however, frequently refers to Buffet concepts in his writings covering the CHINESE INTERNET sector. There are many places in which it makes sense to apply ideas like margin of safety but I promise you that the Chinese internet is not one of them. Last time I checked, Buffet didn’t buy tech companies let alone those trading at 4-8x book value.

Mr. Ji helpfully provides a chart explaining the stunningly complex mood swings of Mr. Market.

Ji also points out the wild variance in Mr. Market’s willingness to pay 30x at some times for Chinese Internet companies and only 25x at other times.

You may want to read some of Mr. Ji’s other work. Here are the actual headlines from some of his most recent reports:

• “Netease.com: A 3-in-1 Gourmet Combo Offered by Mr. Market”
• “Focus Media: ‘Blue Ocean’ Innovator in the Advertising Universe”
• “Ctrip.com: 1Q06: The Second Stress Test for Level 5 Leadership”
• “Tencent: 1Q06: Firing Up All the Cylinders”
• “Sohu.com Inc: 1Q06: Gaining Content Edges in a Harmonious Society”

If you know what any of these titles mean, please email us and let us know.