Archive for January, 2006

The Sell Side: A Case in Point

So I’m doing my job, analyzing a company that doesn’t make the widgets, but instead, supplies the engineered material which goes into making the products which protect the machines which make the widgets. They need millions of dollars to finance the widget-producing-protecting-producing procuess. The management and their bank presented the company to a meeting of potential investors with a combination of numbers, absurdist terms like “Syneries from A Vertical Roll-Up Strategy” and “Greenshoe MFN Language” and slides. They were trying to sell us on why we should invest tens or even hundreds of millions in their company. Then they whipped out this slide. Note that the original slide had an X axis which listed the company and its competitors and a Y axis which listed abritrary cherry picked categories; I have edited the slide to protect the parties involved:

Dots? That chart is the basis upon which I should direct our investors’ money? By dots? AND HALF DOTS? Some poor 4.0gpa-Ivy league grad sold his/her soul to the I-Banking Gods to spend 90 hours per week creating crap like this?

That’s the Sell Side, baby.

Is There a Bubble in Housing Bubble Blogs?

Given Johnny Debacle’s large personal investment in the Denver housing market, all of us here at Long or Short try to keep an eye on the housing market. As a collective, we are skeptical that housing trends will hold up and are worried about having to bail Johnny out of his housing debacle.

Even more concerning, however, is the emerging bubble in housing bubble blogs. These blogs, devoted to detailing the demise of the housing and refi boom, have begun to proliferate more quickly than Freedom Loans or all those anacondas I let loose in the Everglades in the 80’s.

Evidence: in just one query on Google’s blog search, I turned up the blogs below. Undoubtedly, there are more out there. Is the public aware of this pernicious threat? What is being done by Greenspan/Bernanke & Co to ensure a “soft landing”? We need answers, the Fed, and we need answers now.

Please, the Fed, raise the blogging interest rates or constrict the blog money supply now. The Irrational Blogbooberance must stop now.

Cyclical Terrorizer: Long the Monkey Man

You may remember the outbreak of Monkey Man attacks in India a few years back. You may have also asked: “Where did the Monkey Man go?” or “Can he manage my 401k even if I’m not an accredited investor?”

The answer is yes. The Monkey Man went on a hushhush capital-raising tour to start his own hedge fund, The Emerging Market Supernatural Terror Special Opportunities Fund. As the name implies, the vehicle will specialize in investing in third world supernatural terror events, not dissimilar from the Monkey Man’s reign of terror on the streets of New Delhi. The fund already purchased a portfolio of spectral-haunting assets in the Congo region and reportedly bid on a soul-eating dragon in Laos.

Recommendation: The very fact that the Monkey Man was able to raise $400mm in capital to start the fund is bullish for the sector. Long cyclical folk terror, short reason.

Satan’s Portfolio

Ethical and socially responsible investing has made a lot of buzz as a way of dollar voting for a better world. My instinct as an investor says that those fund flows are going the wrong way and their returns since inception back up my argument.

The more profitable questions to answer are: What does Satan invest in? How does he fund evil? Satan’s Portfolio will track the perfomance of the stocks which Mephistopheles is proud to put his money into, namely, companies who benefit from suffering, death, war, tobacco, nutrasweet and fraud.

Halliburton (ticker: HAL)

Satan’s Investment Thesis: Chaos investment. Halliburton does best when the globe is at strife and their lucrative contingency support KBR subdivision can take advantage of the chaos and pad their high margins with fraud. Also benefits from a rise in oil prices which squeezes the poor into not being able to heat their homes or something, I don’t really know as I heat my house with burned $20’s. Yes, it’s almost cliche to have this as the first entry into the portfolio, but within 5 minutes of my mentioning this idea to Juggles, our site’s logs showed a visitor from (Proof). Chilling.

Experian, a subsidiary of GUS Plc (ticker: GUS.L)

Owns credit services and affiliate marketing products which straddle the line between deceptive and fraud. Their division,, is responsible for a significant portion of all pop-under ads. They target unsophisticated people who cannot discern the validity of their services — their “customer” demographic is the poor, the in-debt, and the stupid. Experian is a pillar of the credit system of this country which is backwards, outdated and unfair. And I LOVE it. So does Satan.

Oracle (ticker: ORCL)

Satan’s Words: “I feel most comfortable putting my retirement money in a company whose CEO looks and acts like me.”

Diageo (ticker: DEO)

Owns many of the world’s leading liquor brands. I can personally thank Diageo for days of lost productivity, liver damage, and one pending divorce. Thanks Jose (Cuervo tequila) and Johnnie (Walker whiskey)! If Diageo can somehow acquire Jaegermeister, Satan will take out a 4th mortgage on Hell and ACCUMULATE. Diageo’s only risk factor is its Responsible Marketing Plan. Hopefully, this is a smokescreen; in my opinion, they should consider taking some ads out on Nickelodeon. It is also not lost on Satan the fact that Diageo’s ticker is the ablative and dative form of “Deus” in Latin.

Monsanto (ticker: MON)

A site called described Monsanto as the “World’s Most Unethical and Harmful Investment.” Satan’s words, “back up the truck”.

The Vice Fund (ticker: VICEX)

Satan is not afraid to say “I am a lazy bastard,” so this fund which only buys assets of companies who profit off drinking, gambling, death, national defense and smoking is perfect for him. These are “recession proof” companies because people can’t get enough Vice. It’s 3 year performance is in the 1st Quintile of Lipper’s Multicap Core Category.

We will continue to build the portfolio until we have added 666 securities. We will follow the performance of Satan’a Portfolio vs the socially responsible Pax World Balanced Fund (ticker: PAXWX, an investing display of Evil vs Good. We know that Evil will win, because Good is stupid (and worse at investing).

Melodrama and the Lifetime Channel

From across my Bloomberg.

Lifetime Networks, known for its tear-jerker television movies, is running newspaper and TV ads asking viewers to “dump DISH” after EchoStar Communications Corp.’s Dish Network dropped the channels.


The campaign was expanded today following ads yesterday that said EchoStar is depriving women of critical information. A contract dispute forced EchoStar, the No. 2 U.S. satellite-TV provider, to pull the Lifetime and Lifetime Movie Network channels from its lineup, EchoStar said Jan. 1.

“We want to get back on the air at a fair and reasonable rate,” [The Lifetime representative] said.


Lifetime today ran radio, TV and print ads in cities including Orlando, Atlanta, Dallas and Houston. Yesterday’s newspaper ads, two full pages side-by-side, told viewers to “Take Back Your Lifetime!” The letter to EchoStar Chief Ergen says that by removing the channels, “millions of women will not get the inspiration and support they need and deserve.”

EchoStar’s Cicero offered to broadcast, at his company’s expense, any valuable information or public service announcements to its viewers that they are missing by not watching Lifetime.

Brilliant move by Cicero, knowing that there is nothing of value which Lifetime broadcasts. Other than that one movie about the mom who had an autistic anorexic daughter and then lost her husband to the flesh eating bacteria while she herself was fighting a rare form of eye cancer — that one moved me.

Recommendation: EchoStar (ticker: DISH) is clearly short Melodrama. Maybe you should be too.

The Sell Side (A Continuing Series)

A colleague of mine was talking with the analyst of SellSide Bank who was syndicating a deal that we were taking a look at. The deal was brutal: It was a sub-$50mm EBITDA company that would have negative free cash flow in the short to intermediate term. We were being sold debt in their capital structure and the security would had limited exposure, at best, to any future upside of the company.

Faced with such a profile, poor ratings from S&P and Moody’s, and a meager coupon considering the risk profile, what is a poor sell side analyst to do?

“Yeah I know, it’s a tough profile. But let me tell you this. Give us 18 months, 18 months and we will take you home.”

That’s the sell side, baby.

We will take you home. I can just see an investor asking an analyst “Why did you buy that debt that traded down to 20 cents?” Well, SellSide Bank wouldn’t have underwritten the deal unless they thorougly vetted it right? And the analyst told me he would take me home. “What about all the cash burn?” SellSide Bank put me at ease. Home is safe, I like home.

That’s the sell side, baby.

Long Long or Long Short?

In the comments of Juggles’ Titanium Cut Oatmeal post, a reader remarked about how Long or Short Capital has had declining post size and that he had downgraded us from “Read” to “Too Short.” I thought for a second and looked back through our history of posts and saw that at first (before I was on board) posts were Short. So our roots are Short, but they did became Long and now they are shorter once again. Investment entertainment is a cyclical industry, what can I say.

This apparent contradiction in internal decision making actually illustrates our investing accumen. When it was sensible to be Long Short, we were, buying up Short at depressed multiples on rumors that Google was developing “Google Elongator,” a disruptive technology that could make Short into Long thus increasing the value of all Short and creating a dominating vertical search platform. Later, an investing catalyst occurred completely changing the valuations, and according to our thesis, Long was relatively underpriced. Long or Short had no problem being flexible, and we set our sails Long Long. We have made a veritable fictional fortune trading in Long and in Short.

Consistency is the hobgoblin of the suboptimal investor who can’t change his position for fear of contradiction. Never get married, especially to a position or a woman.

Recommendation: Long Long AND Short.

Do Trends Continue Forever: Nyet

Comrade Kaiser-

Nice reply on how Russia’s recent successes will doubtlessly continue…forever. I mean what trend doesn’t continue on unabated? That was the beauty of the investments my granpappy made in Argentina in 1925, it just kept on going up because where else would it go? And that time in 1979 that pa came home with a flatbed truck full of 1000oz silver bricks which he had bought at $30/oz. The fortune he made selling it all 10 years later (as the trend continued unbroken upward) allowed him to buy a hovercraft. And don’t forget that time in the summer of ’94, when I put my lifesavings in Russian bonds. I love the ruble!

The rule of “Trends Never End” rules. But shouldn’t you look at the relative Russia investment situation now, and decide whether it’s fairly valued or not, or whether there are inherent risks, such as the Russian proclivity for totaltarian rule or their love for vodka, that are not being fully considered or accurately built into prices?


Long or Short Capital Q2’06 Guidance and Dividend Update

After an incredible November, December was competely lackluster in terms of revenue generation, a decline in clicks from 30 to 11 and a lower CPC rate across similar levels of traffic. We still are on pace for our dividend guidance, but subscriberholder growth has cooled dampening our expectations for both revenue and dividend growth. Our Blogad revenue has been almost as much as our Yahoo ads at their current runrate which is disappointing to some degree. Our intuition suggests that the Yahoo ads should yield twice as much per impression given the incentivized nature of our subscriberholders. So far, ad clicks in our RSS feed have amounted to 3 in November and 2 in December, fairly negligible.

None of our content is hedged, so we are subject to the volatility of market prices for sourcing our posts, as our staff’s time waxes and wanes. With that being said, we are optimistic that these trends will improve in January. Q2’06 ends on February 1st, 2006, so there is still some reason to be optimistic for a boost in production, dividend and revenue growth, and an acceleration in subcribers. Our slogan for the quarter is “Work hard. Be nice.”

Product Idea: ATM/Slot Machine Combination

The market to provide slot machines is surprisingly innovative. Since the one-armed bandits went digital, the machine makers — spurred by the casinos’ incredible drive towards efficiency and profitability — have added numerous features (graphics, sounds, videos, machines linked across casinos in order to increase payouts, frequent player clubs, ticket-in-ticket-out etc.) to their machines. They are much more reliable, profitable, and fun for the consumer than the average slot machine even two or three years ago.

Contrast that situation with the ATM. The functionality offered by the average ATM is not significantly greater than that offered two to three years ago. They are not faster or easier to use and they have always been fairly reliable. Meanwhile, the cost to the consumer has been increasing rather than decreasing (although, in fairness, this is probably not the fault of the actual machine manufacturers). Some ATMs used to offer stamps for purchase but that effort now appears dead. The ATM industry needs innovation.

Therefore, I propose the combination ATM/Slot Machine or the SLOTATM. In states where slots are legal, this machine will offer the ultimate in gaming entertainment and cash withdrawal services. It will have a number of new and innovative features including:

  1. Consumers will be able to choose whether to withdraw the exact specified amount of money and pay a $2 ATM fee or they can instead elect to withdraw a randomly chosen amount between $95 and $125 and no ATM fee will be charged. Most consumers will get back ~$96-98 while a few winners will get more. Net net, the revenue generated by the machine will be greater than in a strict fee scenario but consumer satisfaction will increase because they will have paid for a gaming experience rather than ATM usage. [Note that traditional bells and whistles will go off as the random payout amount is being determined.]
  2. Bank of America has over 16,000 ATMs and all of them are already linked. Any large bank could offer huge payouts by spreading the jackpot nationally across their network, Powerball-style.
  3. Bank loyalty will increase and customer defections will decrease as consumers will not want to lose their frequent player points.
  4. Consumers will receive more money withdrawal options. For instance, they will be able to specify “big bills” or “little bills” rather than having to accept whatever bills the machine happens to spit out. Is there anything worse than withdrawing $200 and receiving all $10 bills?
  5. Long lines at convenience stores will be reduced as scratch ticket gambling addicts will instead line up to repeatedly withdraw money from ATM’s.
  6. Possible feature would be to have extreme outlier type events, say 1 out of 10,000 withdrawals gets twice as much money and 1 out of 10,000 gets zero. The zero payout outcome would be well known as “The Whammy” and all ATM’s would hear the echoing cries of “No Whammy, No Whammy, No Whammy, No Whammy!”

It makes so much sense is there any reason that Alliance Gaming (AGI) and Diebold (DBD) can’t get together and get this done?

Creativity Destruction: New Year Culling

Update: All culled posts are deleted as of 1/4/06.

We recently learned about how the Japanese make up the history in their textbooks so that little Japanese schoolgirls never have to learn things like that the Japanese wantonly murdered hundreds of thousands of Chinese in the Nanking massacre or that being able to buy used panties from a vending machine is pretty weird to human beings on planet Earth. Applied to the business of creating business humor online, we think this technique could help keep our own “Japanese schoolgirls” (our readers) from ever knowing the dozens of horrors we have created in failed posts.

Here is a list of Six Posts I’m deleting on Wednesday and specific reasons why they were failures.

Underground Toy Market Is Really a Front for Drugs — No story there. No real business connection, no humor, little truth. Deep, you sucked on that one Bro.

Outsourcing My Thoughts On Outsourcing: Pt 2 — Great concept but in practice worthless, as some readers pointed out (cruelly you cruel bastards). $40 poorly, even if interestingly, spent. Part 1 will remain, but part 2 is to be culled.

Internet Shadow Advertising Market — More like An idea is useless without support and execution.

Charity Pie Revenue Maximization — Who gives a crap about pies? Or charities for that matter? To think, I spent time reading that that could have been spent managing the immigrants who wax my yacht. Next.

Will you replace with the Choo-Choo’s? — I would rather raze the internet and salt the Earth with BloggerSwap’s corpse than leave any mention of that hideous traffic scam existant on the Web.

The Difference Between Looting and Finding — This came from a third party provider.

We just want our subscriberholders to know that Long or Short Capital acknowledges failure; then we destroy it.

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