Archive for January, 2009

Saturday Hilarious

Nothing to do here other than link you to something hilarious for you to invest in.

Black Swan Formation

Long the Zimbabwean Dollar

After Zimbabwe had been bearing the torch of sensible solutions to incredibly complex resource allocation issues for many years, it appears that the forces of dark may be prevailing in the country. The government is abandoning their full support of the Zimbabwean dollar.

“The Government is allowing the use of multiple foreign currencies for business alongside the Zimbabwean dollar,” Patrick Chinamasa, the acting Finance Minister, announced in [an unsettling] admission that the Mugabe’s regime’s battle to prop up the national currency [was being submarined by the forces of darkness and also by impotent cowards].

This is troubling news in a troubling age. But mollifying the trouble is the fact that leadership in both Zimbabwenomics and Mugabe Efficiency Theory has migrated to America. This leadership has been affirmed almost every week since early 2008, as our economic leaders craft new and powerful ways to harness zimbabwenomics to make America into the great nation it used to be, back when we made things rather than just how it is now when we all we make is money and an incredible standard of living, back in the good old days when we killed Indians, and had black lung and union riots that stopped the economy and killed people, and much higher violent crime rates, and much shorter lives, and much less education, and less social mobility, and more racism and no pizza.

Recommendation: Long the Zimbabwean dollar — it is only a matter of time before the US adopts not just the ideology of zimbabwenomics, but the official currency as well.

The Zimbabwenomicsts Say Do Nothing Naked

Zimbabwenomic forces are following up last year’s smashing success in banning short-selling in certain financial firms with new legislation aimed at effectively scrapping the entire CDS market.

House of Representatives Agriculture Committee Chairman Collin Peterson of Minnesota circulated an updated draft bill yesterday that would ban credit-default swap trading unless investors owned the underlying bonds. The document, distributed by e-mail by the committee staff in Washington, would also force U.S. trading in the $684 trillion over-the-counter derivatives market to be processed by a clearinghouse.

It’s about time that someone put together a way to stop the CDS market cold in its tracks. The instrument’s ability to provide hedging for companies’ debt, improved liquidity in names, and more accurate information about the health of issuers is not only dangerous, but it’s overtly capitalistic (they might as well be called Credit Default Ronald Reagans), which we now know to be a mistake. A healthy economy doesn’t need an unfettered free market system — what it needs is a regulated command economy that ensures that houses (and everything else) are always affordable, especially for people that can’t afford them and that politicians are always in control of all economic and financial processess.

This particular zimbabwenomic reform comes from the chairman of one the most progressive committees in the house, and hopefully he and fellow zimbabwenomicist Barney Frank can push forward appropriate regulation of all markets, specifically, regulation that will prevent them from going down.

As much as 80 percent of the credit-default swap market is traded by investors who don’t own the underlying bonds, according to Eric Dinallo, superintendent of the New York Department of Insurance. Dinallo last year proposed outlawing so-called “naked” credit-default swap trading. He shelved the proposal in November because of progress by federal regulators on broader oversight of the market.

More generally, we think one of the effects of the Great Regression will be that everything naked will take a hit. Naked trading, naked shorting, naked greed, naked people and naked CDS positions were the excesses that got us into this mess. The lesson? We, as a society, need to do it with our clothes on, whatever “it” is.

Recommendation: We recommend an unhedged short on naked trading, naked shorting, and naked CDS positions, basically anything naked. Putting clothes on all such actions ensures that nothing is able to go down. Now is a perfect time to bone up on dry humping in expectation of the new regulatory paradigm.

Quotes Entirely Relevant to Investing 01-25-2009

Here are the Six Sigmas: Teamwork, Insight, Brutality, Male Enhancement, Handshakefulness, and Play Hard.
-Jack Donaghy on 30 Rock

Past Quotes Entirely Relevant to Investing

Sent from my Verizon Wireless BlackBerry

Dear Colleagues,
When I sent that message earlier, the one that ended with “Sent from my Verizon Wireless Blackberry,” I did not mean to send it to the distribution list to which it got sent. I know that much of my language was not only colorful, but wholly inappropriate, and for that I apologize. Larry, I am sorry for the comparison I made between you and certain feminine hygiene products. Not only was what I said unfair, but truth be told, I am not even clear that they make sense based on my understanding of the working of those products, which is admittedly imperfect. Sarah, I don’t think that you resemble the legume (gourd?) which I used to describe you — you have to understand it was written in the heat of the moment. The same heat of the moment that caused me to reply to the whole distribution list rather than just the one person I intended. As I pack my bags and prepare for what looks to be a long unemployment, a time no doubt when I will be forced to work unpaid jobs either emptying female sanitary waste baskets or harvesting the aforeimplied legumes (gourd?), I just want you all to know how sorry I am. Let this be a warning to all of you that if you let your Blackberry be your greatest lover, the edge which you constantly ride, the constant tether to the space station of your work, that it can totally cost you a job and lead to sloppily expressed thoughts. I am not very good at metaphors but I think you get what I am saying.
-Joseph Wipskittle

Sent from my Verizon Wireless BlackBerry

Quotes Entirely Relevant to Investing 01-18-2009

There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of voluntary abandonment of further credit expansion, or later as final and total catastrophe of the currency system involved.
-Ludwig von Mises, Human Action (1949)

Past Quotes Entirely Relevant to Investing

Long Torture

This is torture!In the last 18 months, the market has been beaten torture, waterboarded it and, in the last two and half months especially, electrocuted its testicles. Is it time to go long? I won’t draw this out and torture you: the answer is yes!

Sure, as an information gathering tactic, torture’s efficacy is reportedly low. But have you considered that perhaps the research which demonstrates torture’s weaknesses was performed under duress? Those researchers were being tortured by the anti-torture activists to ensure that they would produce the results that proved the anti-torture agenda, since the anti-torture activists know the very truth they fear — that torture works. Their cunning and humanity are forces to be reckoned with.

But not only does torture work, as I have demonstrated above, but it is also fun. I’ve seen 24, and when Jack Bauer tortures someone, he is not only getting down to business, but also letting off steam. As far as I can tell, Jack doesn’t eat, sleep or take any break while he works. So how does he maintain such a high level of performance? By abusing a powerless person, that is how. It recharges him, like a lifesize stress relief toy or a $5000/hour hooker. Have you ever waterboarded a random stranger or a close friend? If you haven’t I highly recommend it. It leaves no visible marks, probably* won’t kill him/her and will leave you flush with an invigorating feeling of power.

Recommendation: Torture has an important place in our society, and is currently well oversold in anticipation of the Obama. Buy now or you’ll be racked with guilt later when torture comes back big.

*We make no guarantee!

The Palm Pre – It’s What Happens to Your Body When You’re Too Excited

As you may have heard, Palm has launched a new phone.  The launch has Wall Street in a frenzied state of excitation, a state of such frenzy that Palm (NASDAQ: PALM) has “doubled in size” in the last two days.  I think we’ve all been excited by “new palms” before.  But this one is special, it’s the first phone to actually be named after the baby-making fluid which biologically signifies you are really sloppily excited about something.

Recommendation: In our experience the presence of ‘pre’ usually means you are too excited/optimistic about whatever you think is going to happen. In layman’s terms, it means you messed up, usually literally, before you even got down to your business. We stick to our long term fundamental thesis of Sell the foreplay (which usually disappoints), and Buy the afterglow. Here is a video of the pre in action.

Quotes Entirely Relevant to Investing 01-11-2009

I couldn’t help asking him once what he meant by coming here at all. “To make money, of course. What do you think?” he said, scornfully. Then he got fever, and had to be carried in a hammock slung under a pole.
-Marlow describing a fellow European in Heart of Darkness

Past Quotes Entirely Relevant to Investing

Nothing I Could Write Would Be Funnier Than What You Said Barney Frank

From a WSJ article on Madoff’s fraud:

Barney Frank, chairman of the House Financial Services Committee, which will have influence over how Congress writes financial market oversight this year, offered a more sympathetic posture toward SEC staff, saying he had spoken with enforcement officials in Boston and elsewhere. “There’s no suggestion that any of them were less than diligent; there were some structural flaws here, but in my experience, it would not be appropriate to blame any of them.”

Really? You mean receiving a letter saying “The World’s Largest Hedge Fund is a Fraud” about the fact that the world’s largest hedge fund actually WAS a fraud, and not being able to figure that out, that is not less than diligent???? The hardest part about due diligence remains actually doing it.

Recommendation: There is every suggestion that Barney Frank is less than diligent. And no, I don’t think it’s just some structural flaws.

Quotes Entirely Relevant to Investing 01-04-2009

Anyone who expects markets to restore a disturbed equilibrium instantaneously will be disappointed. People cannot discover the relevant changes, confirm and assess them, consider alternative arrangements of their affairs, and carry out those changes in an instant. The competent economist appreciates the necessity of patience in evaluating the market’s operation. Simply because the market does not appear to have reconfigured itself fully soon after a shock, we have no warrant to conclude that “the market doesn’t work anymore” or that “the market doesn’t work the way it used to.”
-Robert Higgs (ht: Econlog)

Past Quotes Entirely Relevant to Investing

Long 2009

Slightly over a year ago, we debated chicken little cries of Peak 2007 and, in retrospect, the world would have been better had we been 100% correct and 2007 was as limitless as we had hoped. Well we are back in the chrono-markets, with what we think is a true free lunch. Long 2009. It’s going to be a great year.

In 2008, investment banks ceased to exist, the real estate market was the worst ever, the stock market plunged more than it has since the world was depressed, The Hills continued, unemployment soared and every measure of economic health broke. So on a relative basis, 2009 looks like it is has a full year of easy comps thanks to the way in which God has cooked the books with some kitchen sink accounting.

Our current forecast for 2009:

  1. The stock market’s annual performance will be better than a 35% decline
  2. Consumer sentiment will improve
  3. The first black President ever will be in office
  4. The Hills, and all involved, will try to comically reenact the Jonestown massacre, but their white night will go tragically wrong when their illiteracy causes them to mistakenly add actual cyandide to their flavor aid rather than faux cyanide.
  5. The US will keep kicking the rest of the world’s ass, especially China’s.

Recommendation: Long those who killed it in 2008 (down less than 35%) and plan to kill it in 2009 (down incrementally less than 35%).