Any approach to scientific inference which seeks to legitimise an answer in response to complex uncertainty is, for me, a totalitarian parody of a would-be rational learning process.
-Sir Adrian Frederick Melhuish Smith
Box Office Mojo has analysis on the filmic penguin market:
Despite its Liar Liar alienated father angle, Mr. Popper’s Penguins is shaping up to be a miss for Jim Carrey, who used to knock this kind of movie out of the park. The movie seems like an odd duck for June, and the live penguins aren’t as warm and inviting as other critters, anthropomorphized or otherwise. Animated penguins have had some success in Happy Feet and as supporting players in the Madagascar movies, but Surf’s Up wiped out in June 2007. Live-action penguins are untested outside of March of the Penguins, but Mr. Popper still is no Ace Ventura or Doctor Dolittle or even Evan Almighty.
Recommendation: Live-action penguins are “untested” so only those who can stomach not only the volatility, but the substantial downside risk are playing in those names. We’re short live-action penguins and underweight animated penguins. A catalyst for a change in our opinion would be the onset of another Ice Age or alternatively a substantial increase in the popularity of Italian Spiderman, the latter of which would result even more calls (e.g. demand) for pinguini.
The WSJ’s Heard on the Street column is generally pretty good. So the title of a recent entry, “Housing Bubble Continues to Haunt Fed“, made me interested to hear adults talk about the current stagnancy in real estate and how the hangover from the bubble still lingers. But I didn’t hear any of that malarkey. Instead, I learned that people are debating whether housing plays too big a role in the CPI; specifically, the “problem” is that the housing portion of the CPI is exerting upward pressure on the overall number. Y’know because consumers typically live somewhere and pay for that privilege.
“OER [editor’s note: “owners’ equivalent rent”] is expected to jump to 1.2% year-on-year in December from 0.6% in February, despite a sluggish housing market.”
1.2%!! This is getting serious.
So what should we do?
“Some suggest alternative inflation measures.”
Oh ok. Well, what are “some” proposing?
“A ‘supercore’ alternative excludes not just food and energy but shelter, too, to gauge underlying trends.
There is great opportunity for the Govt to reduce CPI by excluding more items. In fact, this looks eerily reminiscent of another highly successful endeavor in metrics improvement: LoS’s change from GAAP to SAAP (Seldom Accepted Accounting Principles). By changing our standard, we could change our metrics, and by changing our metrics from EBITDA to EBE (Earnings before Everything aka “supercore earnings”), we greatly improved our profitability.
As visionaries in the SAAP space and masters in specious metrics, LoS would like to be included in the “some” who are suggesting alternatives ways to measure CPI. Considering that the evolved goal of the CPI is to show a slight and consistent level of inflation, we propose that the CPI no longer include any components that are increasing in price level more than 1.5%. These items will be increasing as a percentage of the index, thus throwing off its accuracy. Similarly, items that are increasing in price level less than 1.5% or even decreasing should also be excluded since a) we are not interested in deflation and b) the accuracy of the model depends on items maintaining a consistent (rather than falling) proportion of the total index. It’s important to note that any price changes greater or less than 1.5% could skew the whole thing we are trying to measure and render the CPI not just unreliable, but practically useless.
This new CPI, CPI-F (flat), will provide data on all changes in the prices paid by urban consumers for a representative basket of goods and services whose prices demonstrated a slight and consistent level of inflation. We expect it to have the most consistent and consistently low inflation readings of all the CPI measures. Its current reading is 1.5%. In the future, the monthly CPI-F level will be reported on the 5th of the following month, unless there is no change to the index, in which case you can continue to use the prior month’s reading. Here is a pro forma chart that demonstrates what inflation would look like as measured by CPI-F since 1900.
LoS has long been long-on-women ever since we learned that they were the only source for babies. According to years of research and field study, women have a de facto monopoly on having babies. And despite numerous damning letters we have sent outlining the grievous impact this monopoly has had and will continue to have on love markets, the FTC and other international regulatory bodies have shown no interest in taking any antitrust action against women. These agencies appear to be either corrupt or incompetent. Maybe, like the SEC, they are both.
Ultimately, we are not ideologues; we are handsome and incredible investors who lean towards real-world based pragmatism when investing our real fake dollars. And if you can’t break up a trust, you gotta go long it. We have been long women and their various body parts for years: ideas for “Pink Dollar” products for female drivers, long legs, short breast cancer (basically), short penis, playing the menstrual cycle, short girl-on-girl, sexual harassment arbitrage and probably most appropos, an analysis of high-end female assets. Hell, in a 2006 piece of research we did for MSFT, gratis, we exhorted the company to “change the packaging of [their products to appeal to women]“:
Change the packaging of your products. Very few women buy your products, Mr. Ballmer, and you are missing out on their money, or as we like to call it “the Pink Dollar.†You may assume that the key to attracting the Pink Dollar is to improve the content of your offering or to tailor your content to women. WRONG! Substance matters little to the average female. Focus instead on the superficial aspects. Make all your packaging pink, and have a little bow. They eat this crap up. Something that has worked for us on occasion is to put in a little note that says “Sorry.†You don’t have to specify what you are sorry for. It’s important to note that while it’s tempting to enclose a $100 bill, this will only insult and irritate the average female consumer.
Net-net women are a fantastic investment (with the caveat that if the baby making monopoly is broken up or the cephalopods enslave the human race (2026 is our best estimate for the latter), multiples will come in substantially). So we do not begrudge the me-too boutique bank/research firm, Bank of America (NYSE: BAC), agreeing with our genius; we quibble instead with their failure to recognize and properly cite our genius. A sample of their report:
In continuing to focus on the “long-on-women†investment theme that explores the growing importance of female [assets], David Bianco, head of U.S. equity strategy research, said that [womenfolk’s illegal and terrible monopoly on baby production is]increasing discretionary income for women, which should benefit companies that sell specifically to women.
“Women may increasingly become the higher-income earners of U.S. households, and since they [tyrannically] make the bulk of household spending decisions as it is, we think their stronger purchasing power relative to men bodes well for spending on a wide range of categories from vacations to cosmetic procedures to home furnishings,†said Bianco.
Not a single mention of LoS or the other firms whose research they have cribbed.
Recommendation: Short BofA, for being bitches. Maintain long on women, for having all the power.
When evaluating an investment in a new product, one whose markets had previously been thought to be so niche as to be theoretical, this is the kind of language that would make a savvy sophisticated investor feel longer:
[It] also seems like there will be a high likelihood of these vehicles making their way to high-end rental destinations.
Sounds great! Product X will almost definitely be better off if a rental infrastructure develops around it that allows the product to be consumed in small increments by people who otherwise wouldn’t be able to afford it. Think movies (back when they were $100+ to buy), or timeshares, or NetJets, or Netflix (NASDAQ: NFLX), or whatever it is that Rent-A-Center (NASDAQ: RCII) does for poor people, or the idea of…renting as a business model. It works.
But after I tell you that “Product X” is a jet pack (btw “Product X” is a jet pack, rad I know) I think it’s important to note that there is an important caveat in this whole “jet packs being bought by high-end rental firms” thing. Let’s read the unabridged portion of that quote (from this article):
Assuming the first few owners don’t die horribly, it also seems like there will be a high likelihood of these vehicles making their way to high-end rental destinations.
I have bolded the important caveat for the benefit of unsophisticated investors, as well as the Japanese. When evaluating a product’s feasibility in the market place, and the returns one hopes to generate from an investment in such a product, it is crucial to ascertain the percentage probability that the first few owners die horribly. I can’t stress enough how bad the first few owners dying horribly would be — I mean it would be horrible to your investment. So try and avoid that.
Advanced sophisticated investors may also try to map out the percentage probabilities that the last owners will die horribly (see “Segway, The”). If the last owners were to die horribly, it’s likely your investment’s value will similarly fall right off a cliff.
HT to DWL
I once spent an inexplicable amount of time with an Inuit who told me that you can “reason†with a brown bear or a grizzly bear. If you happen upon either type of bear, you simply bargain – i.e., “Look, bear, I have so much salmon, you want so much salmon. Let’s be reasonable and cut a deal.†This Inuit claimed, however, that a Polar Bear was the one type of bear with whom “you cannot reason.†I hope that this is so, if Soros is indeed being pursued by such a bear.
Any amount of time with an Inuit is inexplicable. There is a reason the Quebecois detest them.
But it’s true, we are eminently pragmatic. And our desire for pragmatism is only boosted by our physicality. The carrot looks pretty good to your counterparty when your stick is a 1500lb bear that can knock your head off with one swipe. Hence, pragmatic, reasonable solutions to problems tend to happen. The government knows what I’m talking about. There is nothing else you will need to know.
In front of me stood the majesty of the Mt Saint Elias, or as it’s know in bear — “Roarpaw Pawpawroar”. Snowcaps like candy. Its veins suffuse with glacial flows, drip-drip-dripping down to become streams, to become rivers, to become oceans. I stood on all fours, daintily perched on old Fisherbear’s stone, a sort of reverse-oasis in a fast moving current. As a 4 year old bear, there was no more exciting place to be in the middle of the salmon run. Your bear friends and family all looking on, depending on your savvy to bring home the salmon bacon. How I miss those days.
The Soros’* and Icahns of the world liken the salmon run to particularly memorable days in the market like Black Monday. Days when fortunes and reputations were made, and fortunes and reputations were lost. That works for me, being both a bear and a master of markets. And there resides an apropos lesson in that delicious little swimmer, the salmon.
Salmon are born in the shadows of the mountains. They swim downstream out into the ocean and flourish for years. Normal stuff, stuff you’d expect from any animal. But then they do a crazy thing, something oppositional to common sense. They swim BACK upstream. They fight for every inch up these fast-moving currents, just to spawn. All this takes so much out of them, they die right after. Science calls this semelparous. Bears call this fucking crazy.
But this taught me an important lesson about markets. Markets go with the flow for the most part and do the sensible thing. But eventually they will swim upstream, spawn and die. There is nothing else you will need to know.
*Last I saw George, he was being stalked by a particularly ornery Polar Bear with an appetite for FX speculators.
ROARRRRRRYYYYYRRRRRRRRRAWNNNNNNNN! I am SOOOO sleepy. You people (I can say that shit without being racist, I’m a bear as sure I shit in the woods (which is amazing btw)) get all worked up and jonesing for frappucino when you have hunkered down for like 8 hours tops. Can’t function, face like a sat-upon powdered donut, hair like a goddamned hippy. Try 6 months, fools! You know what hibernating is like? Thermonuclear halitosis, especially if you didn’t do a good job flossing out them salmon bits. My hair looks like a frazzled mess. And dreams so vivid I could taste the shark in my mouth from when I gave it a massive dream beatdown. Still bracing from my return to a reality where not even Vegas will sanction a proper BvS fight.
Anyhow, I don’t know where the jokers who kept me in this cave are. I am mostly sure I didn’t eat them but the timing of my nap compared to the timing of their departures…and the fullness of my belly…and these human bones scattered about…that all begs some mighty serious questions. But fuck’em, I’m here and they’re not. It’s great for you because now I have the run of the place, and perfect timing based on what’s been going down.
So by way of proper introduction, I am Bear and I have an MBA from the “Harvard of Grizzly Maze.” Here is a shot of me at my desk. There is nothing else you will need to know.
Steve Wynn continues to host the most interesting quarterly conference call in corporate America. Suffice it to say, he has an opinion that he’s willing to share. [The bold is all our emphasis.]
Steve on Wynn’s geographic mix:
Listen, we’re more of a Chinese company than American company today as we’re having this call. I love it. Thank God for being outside the United States today. There isn’t an executive in the world that isn’t thrilled about being outside the United States today. What are we supposed to do, draw great hope and satisfaction from the behavior of the senate and the house of representatives? If that isn’t enough to give you heartburn, I don’t know what it is.
Steve on the political process:
I don’t think anybody in America is arguing. There’s a furious-ness in the country about the irresponsibility. $100 million a month we’re supposed to borrow? $100 billion a month we’re supposed to borrow for the next five or six years? Why, it’s totally unsustainable. It’s lunacy. I remember the nexus to Tocqueville, I think it was around 1909, the great political philosopher from France wrote, “The American system of democracy will thrive until that moment when the politicians discover they can bribe the electorate with their own money”. And those (expletive) fools have done it.
Steve on the administration’s impact on Las Vegas and the hospitality industry:
If you’re talking about strictly convention bookings, you can say that 2010 is better than ’09. And you can say you see trend of increased bookings. It is totally irresponsible and naive to say based upon this life trend, we project this infinitely into the future and give you some rosy baloney story about what’s going to happen in 20’11. I am warning my investors that may be on the call, to the extent that you hear any of that from our competitors, beware. There are more questions afoot in this market, in America, that will impact 2011 that I have hair on my head, I’m happy to say, and I still have a full head of hair. No, you will not get any of that us. I don’t see it. I have more questions that answers, I have more pessimism that I had before, and it’s based upon the political environment in which we are living today. And it definitely is impacting Las Vegas.
The President of the United States hasn’t missed one single opportunity to squelch Las Vegas. In our particular case, it’s cost us millions of dollars from companies affected by the President’s remarks that have no connection whatsoever to federal bailouts. But we get phone calls, and I’m not going to mention the names of the companies, from chairman who say we don’t want to appear to be profligate because Barack Obama said this or that about Las Vegas. But it’s had an effect on us. The hospitality industry in the United States of America as a whole has suffered disproportionately during this recession. Maybe automobile workers got a break.
But all of the hundreds and hundreds of thousands of people that work in hotels, restaurants and bars in the United States of America have been totally and completely overlooked in this aborted rescue attempt that has squandered billions of dollars in the United States.
Steve on the state of taxation and the US dollar:
It is preposterous that businesses are under attack in the United States of America. Anybody that makes over $250,000 in the form of a personal income tax return is now, by Washington definition, a rich person, when everybody who has got a college degree knows that the personal income tax rate in the United States of America is the business tax of America. Every sub-chapter S, every individual proprietorship and every partnership in the United States of America files tax returns as individuals. And when they do, and they show that they made $2 million or $3 million or God forbid $4 million, they pay the income tax rate, they deduct their working expenses, their living expenses, and then they invest in a new store, a new shop, and most of the time, 25% of their “profits” are tied up in accounts receivable or inventory.
But all of a sudden, all of those people who make over $250,000 are rich folks to be fleeced. And if that’s job formation stimulation in America, I’m Mary Poppins. And if I sound angry about it and disgusted, I am disgusted and angry at the apparent ignorance of the administration and the congress to recognize the fact that the individual tax rate in the United States of America is, in fact, the business tax of America. And if you keep banging on that, you will you destroy the incentive for job formation in the United States of America. And that’s simple truth. Simple truth. And whether politicians like it or don’t like it means nothing to me.
And that’s why I’m pessimistic about Las Vegas, because those are our customers! Those people out there hustling their businesses and God forbid, showing they made a million dollars as partnership or as an individual, yes, they’re the enemy now, they’re the rich folks. Well, until we get over this, America is in for hard times. Because what’s going to happen is, the people that are going to suffer from what’s going on are the working class of America. My 15 to 20,000 employees, they’re the ones that are in trouble. The reason they’re in trouble is this demolition of the dollar is going to reduce the buying power of the working class of America assure as (expletive) as if we gave them a salary cut of 25%.
Steve honestly assessing a bad decision to build the Encore casino in Las Vegas:
Good question. No, it’s not what I thought it would be. I thought that it would add at least $200 million or $250 million of EBITDA to our bottom line, and nothing remotely like that has happened. Of course, it was conceived in a market that was entirely different today, as you’ve just pointed out. It is a beautiful thing that cost $2.3 billion…Or would we just be better off because we would have had $2.3 billion in cash more than we do now?
…So would I build Encore if I had to do it today? No, I’d keep my money. Fortunately we had enough money that we don’t sweat it…
Whoo-eey! [We] won the Grand Slam, and the Super Bowl, and the World Cup! Our science standards are light years ahead of any other state when it comes to challenging evolution!
-David McElroy, the head of Texas State Board of Education;fellow board member David Bradley has this to say in the same article: “This critical-thinking stuff is gobbledygook.”
