Long or Short Capital

A recent lawsuit (see more details here) accuses Apple (AAPL) of making a product, the iPod, so compelling and feature-filled that it is dangerous to its user. In this case, the accuser claims the iPod’s massive capacity for tasty tunes of tempting him to listen so often and so loudly that the inevitable result was hearing loss.

[Item] 30. Compounding this problem is the [iPod]’s capability to store and play tens of thousands of songs, giving the listener the ability to listen to seemingly endless music without any rest, and without giving ears a chance to recover.

As any MBA worth his salt knows, two data points make a trend — thus, I lump this lawsuit in with the obesity suits plaguing McDonalds (for producing too many delicious fried foods). And, taking into consideration the solid to stellar performance of MCD and AAPL over the last two years, I am now recommending Long or Short readers take long positions in any company producing a product so good it could be considered dangerous by ambulance-chasers or the abdication-of-personal-responsibility crowd.

Recommendation: Long AAPL, MCD and all other such producers. This also dovetails with our earlier analysis of the Idiot Demographic.

Long or Short Capital’s fiscal quarter ended on 1/31/06, and the company reported their results in a press release on their site:

Mister Juggles: “We completed a watershed first Half to our 2006 Fiscal Year. Q2’06 was our best quarter ever, thanks to the genius of management and a compensation package which continues to be heavily weighted towards long dated options in the company’s non-existent stock. We have an ever increasing amount of skin in the game so you should trust us, subscribe your friends to our site and find ways to generate more free cash flow for us which will turn into dividends for you.

We feel great about our 2nd quarter and our 1st half, and we came in at the high end of our recent guidance. We are also proud to have delivered cash earnings per a subscriberholder of negative $0.48 an increase of some sort of imaginary number over last quarter’s EPS of $Div/0. We have taken a cash hit from working capital due to our 79% quarter over quarter revenue growth. In response, we have taken the steps of sourcing advertisements from vendors with more favorable payment terms. This should lead to an opportunity for w/c to be a substantial source of cash going forward. We also enjoyed a nearly 50% increase in subscribership from 60 to between 85-90, breaking 101 at points.

Our marketing spend increased by infinity% quarter over quarter, a steep rise. Our “Project Propeller” brought in roughly 350 visits at a cash cost of $100. We expect it to continue to generate 100 hits per a quarter for 5 years, so we are looking at a visitor acquisition cost (VAC) of under $0.10 on a discounted basis.

We have transferred successfully to our new WordPress 2.0 Content Delivery Platform. And more noticeably, we have altered our storefront from longorshot.blospot.com to our new longorshortcapital.com site which is strategically located between longorshortcapitak.com and longorshortcapitam.com.”

Unaudited Financial Results for Q2’06

Income Statement

Contextual CPC Revenue $116.37

Static Ad Revenue $66.91

RSS + Referral Revenue $12.02

Total Revenue $195.30

Cost of Sales $55.00

Marketing Expense $100.00

Operating Income $40.30

Balance Sheet

Cash $29.69

Accounts Receivable $132.64

Inventory $0.00

Prepaid Hosting $45.00

Accounts Payable $0

Cash Flow Statement

Operating Cash Flow ($42.52)

Capex $0.00

Distributions $X.00

Performance Metrics

Visits 7,639

Pageviews 11,093

Clicks on ads 175

Ad impressions served ~42,703

Subscribers by Email 30

Subscribers by XML 55

Inbound Links per Technorati 60

Inbound Links per Google ~16 sites

“Readers are to submit questions by email to misterjuggles or in the comments section below the post; if we get enough questions and of enough quality we will post a quarter end conference email/chat thing that will allow all of the sell-side analysts out there to fill out their models with the really important metrics like ARPU, maintenance capex spend and whiskeys per post. We will answer all questions provided they inspire humor. Our updated dividends will be announced later this week, as soon as tomorrow, if JD wakes from of his alcohol induced slumber.”

The Greatest Happiness is to scatter your enemy and drive him before you. To see his cities reduced to ashes. To see those who love him shrouded and in tears. And to gather to your bosom his wives and daughters.

-Genghis Khan

A clear buy signal for Oracle (ORCL) is provided in a SF Chronic Article on Larry Ellison’s spending habits.

In e-mails, which stem from a recent shareholder lawsuit against the technology titan, Ellison’s accountant, Philip Simon, warns the billionaire about his habitual runaway spending. Like a concerned parent, Simon chides Ellison for overextending himself on a new yacht, on his America’s Cup team and on his new houses in Woodside and Malibu.

…

According to documents unsealed by a judge in the shareholder lawsuit, Ellison habitually pushes his credit limit of more than a billion dollars to its maximum to finance his yachts and homes. And that’s not even counting some $20 million a year he burns through in miscellaneous lifestyle expenses.

…

Ellison, who identifies strongly with the company he founded in 1977, has been famously unwilling to sell Oracle shares over the years.

Instead of selling them, he has financed his lavish lifestyle — the 23-acre Japanese-style estate in Woodside, the yachts, the airplanes, the Armani suits — by borrowing against his stock.

…

Getting back to the scary days of 2000, when the tech stock market was imploding, a list of Ellison’s debts as of July 13, 2000, showed that he owed $1.022 billion to five banks: JP Morgan, Bankers Trust, CMB, Merrill Lynch and UBS. At that time, those loans came from credit lines that had a combined limit of $1.35 billion, putting Ellison a mere $328 million from maxing out.

At the bottom of a document that detailed Ellison’s 2000 debt load, Simon had scrawled a rough accounting of Ellison’s lavish spending, according to deposition testimony:

“1) Life Style — annual $20m

2) Interest Accrual — annual $75m

3) Villa in Japan — $25m

4) New Yacht — $194m — over 3 yrs

5) America’s Cup — $80m — over 3 yrs

6) UAD — 12m over 3 yrs.”

It’s not clear what UAD refers to. Since this rough budget, Ellison has reportedly spent $200 million building a Japanese-style estate in Woodside, which includes a reproduction of a 17th-century Kyoto teahouse. He has also bought multiple properties in Malibu — $180 million worth, by one report.

Long or Short Capital LOVES stock secured debt loads incurred by CEO’s. What’s a clearer signal of a stock’s value than a CEO being willing to use it as collateral for a loan to build a $200mm replica samurai house in Northern California? As far as what UAD line item represents, my guess would be “Stanford Freshman Girls.”

Recommendation: Long ORCL per the Satan’s Portfolio investing thesis.

Cedric Burgher, the most appropriately-named former CFO of Burger King, is now the CFO of KBR, the division of Halliburton (HAL) that does contingency support and various government subcontracting in Iraq and hotspots around the world. Burgher moved from one about-to IPO company in Burger King, to another in KBR.

This is one of the worst things to ever happen and we fully hope that Burger King will scour finance departments nationwide until they can secure a new Hamburger Helper substitute CFO. This “John Chidsey” guy will not cut it…unless he changes his name to Stanley Chicken Frye. Perhaps BK will just cut through the funny business and elevate The King from his SVP of Accounting role to CFO.

Long or Short Capital Research LLC is revising its price target for GOOG down from “Infinity” to “Infinity-1.” Our new price target of “Infinity-1” reflects a deceleration of the growth in online CPC advertising, the saturation of search engine advertising and increased traction of the idea that Eric Schmidt had the easiest path to billionaire status in history. Google’s stock should now be seen as a “Key Long Term Holding” rather than a “Core Long Term Holding.”

We cannot get enough of Cephalopods (see our earlier analysis of Octopi investments and hand puppets) and we contiue to see this investment as one whose bull thesis will climb a (sea)wall of worry.

What if the Fed stops raising rates? Will we see a rapid decline in the dollar denominated Cephalopod index as foreign banks pull their investments out of dollars and move into safer currencies like the Baht or Flooz? And more importantly, what will happen to the Cephalopod Index?

Putting your 401k in inhabitants of the deep seas can make even stalwart investing professional as ourselves ripe with anxiety. This will put you at ease. In this video a Giant Pacific Octopus (yes the same type that killed the shark in our earlier analysis) either dominates a submarine or tries to copulate with it, all while writing the great Octopus novel with a spare tentacle. We think it answers all relevant questions as to the fundamentals the Cephalopod index.

Recommendation: For investors with a higher risk profile, we recommend investing directly in the Giant Pacific Octopus, even though it is trading near its 52 week highs at $74.06. We appreciate the diversification provided by the Cephalopod index, but if we had to put our cephalopod eggs in one basket, that basket would be the Giant Pacific Octopus. It is not only blowing away the relevant operating metrics, it is actually destroying and/or eating its submersible competition.

(Thanks to collision detection, the only place that loves the Octopus as much as I do)

After almost two weeks of daily posting (henceforth to be referred as “excessive posting”), Long or Short suffered an outage on Saturday that made people unable to sell their subscriberholderships and brought posting to a halt. Some of this has been attributed to poor internal controls, such as allowing Debacle to do whatever he wants on the backend or letting Kaiser alter accounting records to mask related party transactions which would reveal how much Long or Short paid for his sunglasses. Irregardless, we are halting this post 20 words early and will halt posts early all week until this problem is resolved.

No matter how good our kung-fu is, it will never defeat guns.

-Iron Robe Yim

Subscriberholders are locked in; moneys to be distributed as well as a new “In Kind” non-monetary payment.  Email subscribers we have your email; RSS subscribers got secret squirrel messages.  Glee abounds.  Our future is bigger than LiveDoor.

This is why investing in evil is so profitable.

How else can you reconcile yesterday’s Halliburton (HAL) news snippet(via the AP):

“We [Halliburton’s contingency support subsidiary KBR] exposed a base camp population (military and civilian) to a water source that was not treated,” said a July 15, 2005, memo written by William Granger, the official for Halliburton’s KBR subsidiary who was in charge of water quality in Iraq and Kuwait.

“The level of contamination was roughly 2x the normal contamination of untreated water from the Euphrates River.”

…

“It is my opinion that the water source is without question contaminated with numerous micro-organisms, including coliform bacteria,” Carter wrote. “There is little doubt that raw sewage is routinely dumped upstream of intake much less than the required 2 mile distance.”

With today’s news (via MarketWatch):

Halliburton Co. stock hit an all time high Friday after the company reported more than $1 billion in fourth-quarter net income and said it plans to soon file for an IPO of its KBR unit.

Raw Sewage. I LOVE it. And so do investors. That water has some seriously high margins. In evil theory, you could get paid for taking the waste AND again for repackaging it as water.

Recommendation:: We continue to like companies that special in oil services and evil per our Satan’s Portfolio investment thesis. Long Halliburton.

Well, it’s been a while since I’ve posted and that’s because I’ve been entrenched in some serious due diligence on mankind’s oldest profession: prostitution. While the nationwide debate over legalizing prostitution continues, one thing remains clear, the supply-demand economics around sluts show that the services they offer are priced significantly below fair value. To better understand this mis-pricing let’s analyze supply and demand.

Now, the demand for girls who are willing to have sex with me is infinite and as a result the market is in a state of hopeless under-supply. This should lead to perpetual upward pricing pressure, however, unexplainably, the market rate for a slut’s time is surprisingly low. In fact the price of a slut per hour is actually 30-40% less than the price of a stripper, and there’s no doubt which of the two provides a more complete service.

This unexplainable price structure creates an enormous consumer surplus (email me for graphs), and an obvious pair trade.

Recommendation: I view the price of sluts as unsustainably low and therefore am Long them. Keep in mind that every 1% increase in slut prices is 10% additive to slut earnings. Not wanting to be Naked Long Sluts, I’ve hedged myself with a Short bias on strippers which I think will see immediate price declines as the value propisition of good slut is realized in the market place.

We are currently running a sophisticated multivariable marketing analysis of our readers. These three variables are what we think most embodies, you, our readership.

1) Investing
2) Taxes and Accounting
3) Candy

We have set out Yahoo Ads to default to Taxes & Accounting on Long or Short Capital (our new/future home). On our current/old home Long or Short @ Blogspot, we have set the ads to default only to Investing. Based on today’s results we will let you know whether you like Candy, Accounting or Investing the most.

Once we know this extremely valuable information, we plan on combining it with all the other information which we have surreptiously gathered about you from your recurring visits and selling it bundled to the highest bidding e-marketing firm or to satan himself.

Recommendation: Check out our privacy policy.

Did you see the 2nd episode of 24? I’ve been a bit behind but I’m catching up on Tivo. When the show ended, Jack Bauer was in an airport with about 15 Russian terrorists. It looked like he had a handgun but they all had AK-47s. Also, his new girlfriend’s son is in the same building and I get the feeling he’s going to go overboard trying to protect that kid. No way Jack Bauer gets out of this jam. He’s done for this time.

Long: Russian Terrorists
Short: Jack Bauer

Note: I haven’t felt this good about an idea since I shorted Google at $87. That one didn’t work out so I feel like I’m due.