Archive for October, 2007

Dipping into Guacamole

I'm an avacadvocateAvocado. A crucial good for delicious sushi rolls, salads, and the king of mole, guacamole. Avocado crops were partially destroyed by the San Diego fires.

More than 20,000 acres of avocado trees in northern San Diego County have been lost, at least a third of the state’s crop, with another 15,000 acres threatened by flames, emergency officials said.

State farmers usually plant about 62,000 acres of avocados, and the industry is worth about $276 million annually, said state Department of Agriculture spokesman Jay Van Rein.

Recommendation: The hysteria may be dying down, but we think it’s still a great time to go long Avocado. For those who don’t want exposure to the latin snacks market, it would be appropriate to hedge avocado exposure (guacamole) with a short salsa position. We advise buying avocados on, or in, any dip.

Hat tip to reader Terminal Value


Quotes Entirely Relevant to Investing 10-28-2007

Anyone who heeded our advice squeezed tremendous hypothetical returns out of the citrus trade.
Mr. Juggles

Past Quotes Entirely Relevant to Investing


Long or Short Capital Announces Q4′07 Dividend of $0.80

Long or Short Capital’s third quarter of fiscal year 2007 closed on July 31st, 2007. After reviewing our financials, we have determined that the quarterly dividend will be at the formula level of $0.80 per a subscriberholder as of 7/31/2007. To qualify, all you need to be is a subscriber, either by XML or E-mail, as of 7/31/2007. If you were not, you will not be eligible.

For more information on how to collect your cash or cash equivalent dividend for Q4, please refer to our Dividend Policy. Given our float of 1216 subscriberstakes (as of 7/31/2007), a 5% growth assumption and our trailing twelve months total of dividends of $3.78 per subscriber, our current capitalization is $241,315 using a dividend discount model.


Long or Short Capital FY’07 Results

Top Articles from the Fourth Quarter

  1. How to Say All Their Money is Gone
  2. Motivated Prostitutes, the Opposite of Lazy Unions
  3. Zimbambwenomics and Mugabe Efficiency Theory
  4. If Only Water Wasn’t So Fattening
  5. The Ring of Greenspan
  6. I’m Calling the Top, today. My ten signs
  7. Vegetable Arbitrage

Top Articles from the Third Quarter

  1. Four Simple Steps to Becoming a Thousandaire
  2. Jacob, Son of Isaac, the First Value Investor
  3. Adjusted GPA on a Pro Forma Basis
  4. Pomegranate Capital Thinks Women Can Run Money Better Than Men, Is Wrong
  5. Crazy Person or Bluetooth Headset?: The Home Game
  6. The Market, She’s a Bitch
  7. Dogs Can Smell Fake DVDs and Other Malaysian Lies

Top Articles from the Second Quarter

  1. Vertizontal Consolidation
  2. Stop Global Warming, Make Emissions More Delicious
  3. 2×2 Matrix: Less is More
  4. Accounting in My Refrigerator
  5. Joe Theismann Presents Monday Morning Investing
  6. Critical Mass Supplier
  7. Kaiser Falcon Eyes

Note that the financials below are unaudited and may contain non-GAAP measures. All numbers comply with Seldom Accepted Accounting Principles (SAAP).

Unaudited Financial Results for FY’07
Income Statement

Contextual CPC Revenue $861
CPA Revenue $236
Static Ad Revenue $2483
Other Revenue $84

Total Revenue $3668

Cost of Sales $78
SAAP Income $3437

Balance Sheet

Cash $2914
Accounts Receivable $463
Inventory $0.00
Prepaid Marketing/Hosting/Reg $142
Accounts Payable $0

Cash Flow Statement

Operating Cash Flow $3146
Capex $0.00
Dividends $X.00

Performance Metrics

Visits 247,156
Pageviews 509,143
Clicks on ads 1224
Subscribers by Email 195
Subscribers by XML 1021
Technorati Rank 36,949
Inbound Links per Google ~403 sites
Google PageRank 5

Past Results (due to our reliance on SAAP, previous unaudited financial results are not reliable)

Long or Short Capital Q1’07 Results
Long or Short Capital Q2’07 Results
Long or Short Capital Q3’07 Results
Long or Short Capital Q4’07 Results


Long or Short Capital Reports Q4’07 Results

Long or Short Capital’s fiscal 4th Quarter ended on 7/31/07, and the company reported its results in a press release:

Mr Juggles: “Greetings. We like numbers because they are objective. As the saying goes, opinions can lie, but numbers can’t. So let’s start the call off with some numbers. Number of quarters in Long or Short history with more revenue than Q4 2007? 0. Q over Q revenue growth? 850%. Q over Q traffic increase? 360%. As you are accustomed to hearing, this quarter was our best quarter ever by any metric, even made up ones like Mugabe references per a perf words.

The actions collectively taken in the third quarter, paid off handsomely. If you were to make a list of what we set out to achieve you could probably check off every single thing; we actually tried to do this but we found out that the list we wrote everything down on had been lost. We are working on this, and know that we take keeping track of lists to be among our top focuses in H1’08.

A lot of our subscriberholders have been concerned about our accounting situation and our delayed delivery of our Q and K. Let me tell you, we have been concerned too which is why we have mostly been ignoring the situation and hoping that it would go away. This did not turn out to be an effective solution and we are still having unable to reconcile our trailing quarterly results with our fiscal year results. What we did find out is that this situation is entirely consistent with SAAP, and thus, it is no impediment to filing.

Ssiztah, SSST, our measure of organic traffic, grew 19% sequentially, compared to only a 5% sequential improvement in Q3. Our proprietary “Eyeball Monetization Conversion” ratio, a non-pageview measure of revenue generated per customer, rebounded to $15.56 after dipping to $14.49 in Q3, as we the gains we picked up in text link ads more than offset our losses in referral revenue. Our EMCr increased 110% compared to Q4 2006.

Earnings per subscriberholder was $0.99 and we think the $0.90 to 1.10 level is sustainable. Despite its sustainability, we still expect to beat that going forward. That is how we do. We generated $1209 in revenue for the quarter, and as I mentioned earlier, that was an 850% increase year over year. The upside in our business is largely leveraging traffic growth over our advertising.

We see some additional opportunities for growth in text link ads which are not sensitive to traffic swings, but we expect short term volatility due to operational issues with one of our text link ad suppliers (Text-Link-Ads.com). Their ads are not functioning properly, and the vendor has been unhelpful and disinterested in assisting our tech team in rectifying the issue; our last 5 e-mails have gone unanswered. This is the same vendor who has in the past sold our ads on a discounted basis, without permission, at permanent and unalterable rates.

This pricing strategy of theirs is antithetical to our strategy of planning for future growth. Given their contractual 50% share on the revenue the ads they place generate from our site, this represents a fire sale of valuable site real estate. We are 100% against discounting and have no intentions to be a discount provider of satirical financial research. As such, we are actively exploring discontinuing our relationship with this ad vendor due to the fact that they are “sneaky terrible”.

Long or Short is as ad saturated as we are comfortable with. Our comfort level, in regards to this, is dependent on opportunities for marginal revenue and is, frankly, easily swayed. We do expect a pickup in CPA initiatives as the holiday season approaches, but the form of those initiatives has not firmed yet.

Our subscribership increased from 1012 to 1206. As could be expected, our FCF decreased to $1,026, after last quarter’s timing boosted $1,417. As to the excess cash we had on the balance sheet at quarter end, because of some accounting fraud issues we are finding that the best use of the cash on the balance sheet will almost certainly be on acquiring an appropriately prestigious corporate pen. We are still exploring what corporate pen is most consistent with producing the levels of prestige commeasurate with what Long or Short Capital subscriberholders would expect. Additionally, we expect the accounting fraud issue to have an impact of well under one million [inaudible] and as such, we do [inaudible] to get into it further.

Returning to the metaphor I used on the last call, we were that 7 coming out of college, and we spent Q3 and Q4 exercising, investing in our wardrobe, blonding our hair and not-eating three healthy meals a day. Now we are a 9 and everyone wants us. The question is, what do we do now that we have successfully transitioned? The answer? We embark on a career as a CNBC or Fox Business News reporter or anchor. With our ten cent head and our million dollar body, this is our clear next step and Long or Short is pursuing this to its fullest. We will update you on our efforts in this vein on our next call. Thanks and let me say on behalf of management that we will continue to make ‘Long or Short Equity Ownership Experience. â„¢’ as amazing for you as it is has been for our yacht collection.”

Top Articles from the Fourth Quarter

  1. How to Say All Their Money is Gone
  2. Motivated Prostitutes, the Opposite of Lazy Unions
  3. Zimbambwenomics and Mugabe Efficiency Theory
  4. If Only Water Wasn’t So Fattening
  5. The Ring of Greenspan
  6. I’m Calling the Top, today. My ten signs
  7. Vegetable Arbitrage

Top Articles from the Third Quarter

  1. Four Simple Steps to Becoming a Thousandaire
  2. Jacob, Son of Isaac, the First Value Investor
  3. Adjusted GPA on a Pro Forma Basis
  4. Pomegranate Capital Thinks Women Can Run Money Better Than Men, Is Wrong
  5. Crazy Person or Bluetooth Headset?: The Home Game
  6. The Market, She’s a Bitch
  7. Dogs Can Smell Fake DVDs and Other Malaysian Lies

Note that the financials below are unaudited and may contain non-GAAP measures. All numbers comply with Seldom Accepted Accounting Principles (SAAP).

Unaudited Financial Results for Q4’07
Income Statement

Contextual CPC Revenue $283
CPA Revenue $7
Static Ad Revenue $891
Other Revenue $28

Total Revenue $1209

Cost of Sales $19.55
SAAP Income $1190

Balance Sheet

Cash $2914
Accounts Receivable $463
Inventory $0.00
Prepaid Marketing/Hosting/Reg $142
Accounts Payable $0

Cash Flow Statement

Operating Cash Flow $1032
Capex $0.00
Dividends $X.00

Performance Metrics

Visits 77,671
Pageviews 157,529
Clicks on ads 491
Subscribers by Email 195
Subscribers by XML 1021
Technorati Rank 36,949
Inbound Links per Google ~403 sites
Google PageRank 5

Past Results (due to our reliance on SAAP, previous unaudited financial results are not reliable)
Long or Short Capital Q1’06 Results
Long or Short Capital Q2’06 Results
Long or Short Capital Q3’06 Results
Long or Short Capital Q4’06 Results
Long or Short Capital Q1’07 Results
Long or Short Capital Q2’07 Results
Long or Short Capital Q3’07 Results

Also here is a look at our Google Spreadsheet Financials spread out quarterly. As you can see, we strictly adhere to SAAP.


A Tale of Whoa

The call was supposed to start at 3:30pm. It’s 5:28 as I type this, and the blood that has been pouring out of my ears and onto the print-out of your deck is the direct result of actions you took. I would offer that this is not a desirable event in your capital raising efforts.

I was mostly minding my own business, which generally is what I mostly do, telling the conference coordinator my name and such. When I was finished with her, I was mentally prepared to spend the next 10 minutes readying for the call so I could ask you some amazing questions about bad debt expense or perhaps about your ability to pass on increases in commodity prices to your customers, especially significant when one considers your untoward exposure to tungsten.

When I was done with the conference coordinator, I was put into the call, dropped into that nebulous space that just hangs as I just hang. It was here where it happened. Where you did IT. His plodding, mellow, secretly insidious words began butterknifing through my ear into my brain’s grey machinery.

Oh, father and mother, sister and brother

You slipped James Taylor into one of my ear drums. His words crush free will, their internal beat an urge to commit the most heinous crimes.

If it feels nice, don’t think twice

It was this moment, where I could no longer think twice.

Just shower the people you love with love

My hands took to trembling and my ears took to pleading. Mercy. Some things, JD, are so horrible, you can’t unhear them. We are are your ears, please trust us. End us. End the sounds. We can never go back to what we were JD, every sound in the future will be tainted by what has happened today at 3:31pm.

Show them the way that you feel

The cheap metal tip jutted into my right eardrum, injecting its green ink into my brain. With a conductorial flurry, I struck the the tip cross-handed into my left eardrum. The pain was replaced by a liberating silence.

Unburdened, I was ready to receive your pitch. And then there was darkness.

Maybe your investment proposition was a good one, maybe it was a bad one, but with the congealing maroon pool dancing across the top of your prospectus, and sensation making a flight (from my body) to quality, it doesn’t seem likely that that will be known.


Dear Greenspan, Please Shut Up

Dear Alan,

During your time at the Fed, you were famously circumspect. Now you can’t shut up. Please do so.

Yesterday, I was reading an article on Bloomberg detailing a recent talk you gave. You made a lot of points, probably a few too many. Let’s address a few.

  • “Obviously there is a limit to the extent that obligations to foreigners can reach,” Greenspan said in a speech in Washington yesterday. The dollar’s decline to its lowest since 1997 may be “an indication America is approaching this limit.”

    Thanks for the crack analysis, Alan. I don’t think I could have figured out that foreigners have finite resources. Also, I thought the dollars weakness might be somewhat related to the fact that you have encouraged rampant inflation by 1) artificially suppressing interest rates and 2) rigging the government statistics to make sure said inflation didn’t appear to the public other than in their weekly bills and (lack of) savings accounts.

  • Greenspan first predicted that investors abroad would tire of financing the U.S. current-account deficit in a Nov. 19, 2004, speech in Frankfurt. “A diminished appetite for adding to dollar balances must occur at some point.”

    Well thanks for addressing this issue while you still had some clout.

  • Greenspan also said yesterday that the August surge in the cost of credit following increased defaults on U.S. subprime mortgages was an “accident waiting to happen,” given that investors were pricing risk too cheaply.

    Again, Alan, I think you’re trying to rewrite history here, no? Were you not on watch while interest rates were held down. Does the Fed not have oversight of the banking and lending system? So I guess you are pretty much responsible for not forcing lenders to focus on credit quality.

  • The former Fed chief said central banks increasingly appear to have “lost control” of market interest rates beyond three to five years of maturity. Before departing the central bank in January 2006, he said the lack of increase in long-term Treasury note yields during a period of rising Fed rates was a “conundrum.”

    Alan, dude, this is not a conundrum. You don’t affect long-term interest rates any more because the markets don’t believe you. You are the central banker who cried wolf.

In conclusion, I would appreciate it if you would shut up, Alan. Ben has a hard enough job and is mucking it up enough already without you wading in every three days to provide running commentary. Your sonorous book has compensated you richly. Please retire to somewhere secluded, stocked with Ayn Rand pinups and preferably without a phone.

Sincerely,
Mr Juggles
CEO and Head Commissary
Long or Short Capital


Quotes Entirely Relevant to Investing 10-21-2007

Jack Donaghy: Lemon, I’m impressed! you’re starting to think like a businessman.
Liz Lemon: A businesswoman.
Jack Donaghy: I don’t think that’s a word.
From 30 Rock

Past Quotes Entirely Relevant to Investing


Language Matters: SIV edition

Yes, I realize that a sieve is used to separate desired objects from unwanted material. However, it also has colloquial meanings: “in metaphor and simile, sieve may often be used to refer to things that are leaky…In particular, in hockey, a goaltender who lets a lot of goals through is sometimes compared to a sieve.” This is is a vehicle people that people should put their money into? A SIeVe?

Recommendation: Do not invest in vehicles (SIVs) that are named after leaky containers or goalies who allow too many pucks into the net. That is dumb. Do not even ask about Super SIeVes. And we won’t mention anything about SLUT either.


Kazakhstan to Hedge Funds: “Mugabe, Set, Match, dudes”

Mugabe is only growing stronger in the world, his discorporated Zimbabwenomic-self is popping up on the very edge of dynamic economic policies. Kazakhstan has announced it will buy publicly listed Kazakh bank stocks until prices return to their normal price (in this case, “normal” should be read as “all time peak”):

Kazakhstan will respond to an “attack” by hedge funds by buying shares next week in the country’s banks that are listed on foreign exchanges to support prices, its prime minister said,

“Kazakhstan is under attack from hedge funds and we will fight back,” Karim Masimov said, after president Nursultan Nazarbayev complained the country was suffering from “unfounded” downgrades of its credit ratings.

The government said it would buy stock of banks until prices reach “pre-August levels” and will do the same for non-banking stocks “if warranted”. The state was also prepared to lend $4bn (£2bn) to banks to ensure liquidity, he said.

Kazakh banks have been hit by the ripples from the US sub-prime crisis. Kazkommertsbannk, Alliance and Halyk Savings Bank are all listed in London. Many banks in the country have also been hurt by an outflow of deposits and waning confidence in the national currency, the tenge. In August, banks suffered “massive withdrawals”.

Recommendation: The Borat mania caused us to be short everything Kazakh, but since then K-Stan has been flying totally under the radar. The implications of a Mugabe-style explicit government put on Kazakh stocks, leads to our valuation models predicting a price for any Kazakh bank stock of X+1, where X is the current market price. We rate Kazakh bank stocks as a “Strong Buy Indeed” because prices, per our valuation model, can only go higher.


Billions and Billions (of Idiots)

NASDAQ stocks, especially those with high betas, fell last Thursday because of a JPMorgan equity research note expressing caution about Baidu’s (NASDAQ: BIDU)3Q revenue estimates. Baidu, which had been trading up several percent at an all-time high of $359, quickly dropped 10%, later closing at $309. That would seem reasonable except:

  • Baidu took the rest of the market with it. Companies like Google, Apple, Research in Motion, and Amazon.com all went from being positive on the day to deeply negative before rebounding slightly. Keep in mind that Baidu accounts for $~66mm of quarterly revenue (i.e., nothing) and yet it is moving hundreds of billions of market cap a continent away!
  • The same JPMorgan analyst who reduced his Baidu estimates today had upgraded Baidu two weeks ago and initiated with a $400 price target. In a report titled Billions and Billions, he had recommended buying a stock with a 34x 2010E EPS multiple

Finance is Even More a Scam Than We Previously Admitted

Several weeks ago, we came out and admitted that finance is a scam. It sounded like we were coming clean, but we admit, we held back a little that we didn’t share. In fact, finance is way more a scam than we admitted.

Citigroup (NYSE: C) (among other banks including BofA (NYSE: BAC) and JP Morgan (NYSE: JPM)) is creating a “super conduit”, essentially a $100 billion backstop for structured investment vehicles (SIV) to add a bid into a bidless market, a market which is 25% comprised of Citigroup SIVs. When the short term loans issued by SIVs to fund their purchase of riskier loan assets comes due, this super conduit will buy the short term paper if the existing holder decides not to roll their existing exposure. The solution to the SIV problem is….a bigger SIV…errr we mean a “conduit” to make sure things are “orderly-like, see”! Citigroup, with the coordination of the US Treasury, will be bailing itself out from having to put these assets onto their balance sheets….and charging a fee for the privilege!

We amend our previous admission to reflect the following: “Finance is really a scam where banks and large international financial firms, all of which are incrementally better and more prestigious than your firm, get together with the collusive glue of the central government, and indemnify themselves from ever having to bring a mistake onto their balance sheets, much less be held accountable for a mistake in any meaningful way.”


Quotes Entirely Relevant to Investing 10-14-2007

Carelessness. I lost my one true love. I started drinking. The first thing I know, I’m in a card game. Then I’m in a crap game. I wake up in a pool hall. Then this big Mexican lady drags me off the table, takes me to Philadelphia. She leaves me alone in her house, and it burns down. I wind up in Phoenix. I get a job as a Chinaman. I start working in a dime store, and move in with a 13-year-old girl. Then this big Mexican lady from Philadelphia comes in and burns the house down. I go down to Dallas. I get a job as a “before” in a Charles Atlas “before and after” ad. I move in with a delivery boy who can cook fantastic chili and hot dogs. Then this 13-year-old girl from Phoenix comes and burns the house down. The delivery boy — he ain’t so mild: He gives her the knife, and the next thing I know I’m in Omaha. It’s so cold there, by this time I’m robbing my own bicycles and frying my own fish. I stumble onto some luck and get a job as a carburetor out at the hot-rod races every Thursday night. I move in with a high school teacher who also does a little plumbing on the side, who ain’t much to look at, but who’s built a special kind of refrigerator that can turn newspaper into lettuce. Everything’s going good until that delivery boy shows up and tries to knife me. Needless to say, he burned the house down, and I hit the road. The first guy that picked me up asked me if I wanted to be a star. What could I say?
Bob Dylan on how he chose his career

Past Quotes Entirely Relevant to Investing


WSJ Follow Up to Finance is a Scam

Today, the WSJ has an article on the recent syndications in the leveraged loan market of formerly hung deals that outlines in detail the “Finace is a Scam” piece from JD last week.

Yet for all the relief among bankers, the sales haven’t come easily — or profitably. They have offered only the highest-quality portions of the debt for sale, and that at a loss. They have also made concessions that could come back to hurt them, such as selling the debt at a discount while the huge supply raises questions about how long both Wall Street’s united front and the upbeat mood will last.

So far, what has been sold is a drop in the bucket. Standard & Poor’s Leveraged Commentary & Data estimates that about $30 billion of a total of $310 billion in North American LBO loans have been sold so far. As much as $100 billion in debt is due to come to the market in the next 30 days alone.

A week before the W Hotel presentation, banks successfully orchestrated the sale of the first big chunk of the $24 billion debt for the First Data buyout. They surprised even themselves by selling almost double the amount planned. The bad news: to accomplish that they agreed to sell the debt at 96 cents per dollar, locking in losses after their fees were figured into the deal.

In some cases, private-equity firms whose deals the debt is financing were among the bigger buyers of the debt. KKR, for example, expressed interest in purchasing a large amount of First Data debt, eventually receiving a $400 million allocation, according to people familiar with the deal.

Recommendation: A portion, if not all, of that $400mm First Data ticket from KKR was financed by Citi. $400mm is an extremely large amount of loans to buy in one deal. Citi and other banks probably provided similar financing to other hedge funds and private equity players; essentially on a net basis, not really selling these loan assets but paying a fee (on top of the discount 96 price or whatever) to get these loans off their books and getting publications to report that these deals have cleared the market with the hope that the banks can then move the rest of the overhang, which is an actual order of magnitude larger than what the banks have moved since the credit crunch began. But don’t worry, credit markets are fine!


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