A Letter to Our Shareholders: On Being Taken Over

Recently, Carl Icon, a noted corporate raider and greenmailer and Chairman of Liquid Icon Capital, LLC ("LIC"), announced his acquisition of a significant block of Long or Short Capital, LLC stock along with his intention to compel changes in management here at Long or Short.

Because we are happy in our cushy offices and enjoy our substantially over-inflated salaries and bonus plans ripe with inexorable options in a fictious stock...

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Piratery on the Catwalk

It was only a few weeks ago, that we outlined that providers of pirate patches and clothing would benefit from the rising piratery tide. Now witness piratery on the catwalk...


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Tales from My Internecine Struggle with the IT Department

I begin my descent to the 23rd floor. As I exit the elevator bay at my destination level, a colony of cubicles are laid out in front of me, perfectly aligned as if created by African honey bees. I scan the area and alight East, turning around a corner.

The monstrous IT guy remains motionless just ten feet away. Emotions give way to cognitive thought and I train my glare on him. Almost on cue, he begins his approach.



With blinding acceleration, he lurches onto me with a powerful "thud crackle". He slams into my chest. The impact is incredibly powerful, knocking the wind out of me. His huge arms envelope my complete upper body and I can feel my chest plate move as his beak grinds against it...

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Carl Icahn is Blogging?

It would be remiss of us to fail to note the arrival of Carl Icahn on the blogging scene via his new entity Liquid Icon Capital.

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The Purchasing Powerless

A macro trend that has concerned us greatly is the ability of the "family of four" unit to afford the modern American life. In previous generations, the FoF could afford any leisure they saw fit from sporting events to theaters to mega yachting; they could use the remainder of their moneys to run family farms which were crucial to soaking taxpayers for billlions in subsidies and ensuring that sugar was replaced with corn syrup in soft drinks...

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Quotes Entirely Relevant to Investing Powerpoint

An Ode to Powerpoint:

While you were making your [Power­Point] slides, we would be killing you.
-Russian officer commenting to a US offier on who would have won if we had ever actually fought WWIII in Western Europe.

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Short: Mark Davison

Continuing investigation by Long or Short Capital into the widening "Star Trek Imposter" scandal has revealed that Pitt-Fox, Kelton's Head of Corporate Finance Mr. Mark Davison has also been embroiled in the controversy.



Prosecutors allege that Mr. Davison has been supplementing his income (and failing to report it) via similar Star Trek convention gambits as recently uncovered by Long and Short with respect to Enron bad-guy/Star Trek android David Delainey...

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Ask Julia About Your Length

Julia Mezzanine Tranche is an analyst at Long and Short, as well as a member of the Non-Certified Advice Columnists of America, the International Society of Bad Advice Columnists and Chairwoman of the Prestigious European Association for Paperclip Entrepeneurs and Analysts (PEAPEA).

Note: some letters may be "enhanced" for self-glorification.


Dear Julia:

Recently, Long or Short Capital's Johnny Debacle wrote an [interesting and dynamic piece on Phantom Bonds totally characteristic of the brilliant analysis that typifies Long or Short Capital]. He indicates:

If you have a 20 year plus horizon, then you probably want an allocation that is heavily weighted towards equity, say 90-100%. But you could supplement a 100% equity allocation with an incremental 20-30% of phantom bonds, without disrupting your asset allocation.

As I am 102 years old, my own horizon is somewhat shorter. Can you recommend some Phantom Bond allocations that might be better for my needs?

Signed,
I'm Dreadfully Hearing Impaired in Tiny Ithica, Texas.

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JD's Lending No-No's #2 and #3

Read JD's Lending No-No's #1a and #1b. The focus today is on what can be gleaned from a lender presentation.

Lending No-No #2a: Don't loan to companies who will need to control costs, if they have no connection to actual real world cost controlling.

Examples:

I was recently in an Italian city for a meeting. The company I was there to see indicated that the best way from the Aeroporto to the meeting was by taxi, so I trusted them and took a taxi. It was €80. I later found out that there was a €5 shuttle express that would have taken me with half a km of the meeting and would have taken about 10 minutes more. These are the people charged with cutting costs in a large industrial company that operates in a cyclical sector that saw several competitors file for bankruptcy only a few years ago.

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How Not to Name Your Company

In my unending search to uncover undervalued and badly named stocks I came across: "CAPEX SA" (CAPX.BA). CAPEX is an Argentinian electric utility serving the completely deserted but somehow still under-penetrated Patagonia region of South Ameria. We are initiating coverage of CAPEX with a SELL rating. CAPEX has a strong track record of raising and spending capital but that seems to be where the story ends.

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Appropriately Named Executives

I haven't seen such appropriate names since Michael Stonebreaker played football at Notre Dame.

• Lakshmi Mittal, CEO of Mittal Steel Company, a redundantly-titled corporation.


• Cedric Burgher, former CFO of Burger King (he never should have left!).


• Rick Wagoner, CEO of GM

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Quotes Entirely Relevant to Investing Jesse Livermore

A loss never bothers me after I take it. I forget it overnight. But being wrong –not taking the loss—that is what does damage to the pocketbook and the soul.
-Jesse Livermore

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Short Boy-on-Boy

Long or Short Capital has initiated prophylactic coverage of "Boy-on-Boy" in conjunction with recently picking up "Girl-on-Girl."

The Boy-on-Boy space is saturated by multiple market actors and opportunities for price discrimination are muddled by a highly fragmented marketplace. Increasing commoditization in the space limits opportunities for upside absent domination by a stronger alpha player. In addition, low or no barriers to entry mean that the stiff foreign competition (Dutch in particular) has deeply penetrated the nearly frictionless space from the bottom up...

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Are Phantom Bonds Right for My Portfolio?

A lot of questions have been coming in about so-called Phantom Bonds and where they fit in the asset allocation of a personal investment portfolio.

The answer is that it depends.

If you have a 20 year plus horizon, then you probably want an allocation that is heavily weighted towards equity, say 90-100%. But you could supplement a 100% equity allocation with an incremental 20-30% of phantom bonds, without disrupting your asset allocation. How is that possible? Well one of the unique features about phantom bonds is they don't actually exist. So in addition to the existing equity level rate of return, phantom bonds would be adding both non-existant diversification AND non-existant fixed income payments.



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Revising Snoop Dogg Down

Like a company that has expanded outside its core business, Snoop Dogg has overextended himself. He has peaked and is ripe to be shorted.

Snoop Dogg has rebranded himself repeatedly, going as:

• C. Broadus
  
• Calvin Broadus
  
• Snoop
  
• Bigg Snoop Dogg
  
• Snoop Doggy Dogg

He lacks focus and recently has gone even further afield. He has appeared in advertisements for Chrysler, promoted hot dogs, and performed cameos in multiple movies. He even went so far as to produce his own porno film.



All this means that Snoop Dogg's returns on incremental capital have been...

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GOOG No Means Yes Baby Part 3

(Read GOOG, No Means Yes Baby Part 1 and GOOG, No Means Yes Baby Part 2 )

Intrigued by the reaction of Mr. Moncrief, in Part 1 and the general inability of these analysts to take "No" for an answer, this analyst arranged for an interview at Mr. Moncrief's midtown offices. We were particularly interested in the impact personalities might have on sell-side professionals. What was the model for their attitude about these stocks that seemed to defy all caution? Ignore all negative news? The transcript is attached below.

Prescott R. Moncrief III (on phone): "...c'mon Bateman. We'll kamikaze over to Nell's, chase some cotton underwear. Charlie Cushing knows this 18-year-old bimbette that's gor-geous. Hold on. WOAH! This skirt who looks just like Ailcia Witt back when she was still hot, like in that Sopranos ep, just walked in, let me call you back, Patrick. Hello. What have we here? I'm Prescott R. Moncrief III, the administrator of this facility. And who might you be?"

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Piratery and Warren Buffett

In connection with recent recommendations on piracy, Long or Short Capital's managers have been closely tracking developments in the privateer market. So too has one famous Nebraskan investing guru.

We have uncovered renewed interest by Berkshire Hathaway in piratery and, in fact, the adoption of piracy directly by Berkshire's Warren Buffett, and therefore we are boosting our recommendation.

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A Guide to Boring Conversations with Financial Professionals

You: So did I tell you about my portfolio? It's totally kicking ass, and that Oil Conglomerate Search Engine company is going to be the name of my new boat. Also that Commodity Producer Consumer Electronics company has been generating stellar returns over the last 6 months. It's green every day. I should just start my own fund. I AM THE MAN.

You: So I read in the Journal today, [insert anything].

You: [Any story involving golf or fish or boating where someone does not die or at least get maimed by sonar]

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Quotes Entirely Relevant to Investing Solzhenitsyn

If one is forever cautious, can one remain a human being?
-Aleksander Solzhenitsyn

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Sell Out Saturday: Q3'06 Mid-Quarter Earnings Update

We are revising our guidance down for our Q3 revenue projections. Current contextual CPC advertising is down 60% sequentially period over period. Although our spirits are buffetted by our Infinite% improvement in YOY Q3TD growth, this is probably due to a slight misunderstanding of basic principles of logic and arithmetic. Static text ads are performing as expected, while Blogads is only slightly below plan at $Pretty Good in attributable operating cash flow.

After an unstensive SWOT analysis...

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Short Novartis

The Wall Street Journal is reporting "Novartis to Pay Infinity to Develop Cancer Treatments"

While we are all for cancer research, it will be really hard to get attractive returns for shareholders on an initial investment of infinity dollars...

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I bet you've at least seen the MOVI

Our previous pieces on Moviegallery (MOVI), are looking pretty damn good (see our earlier reports Corporate Tarpit and Translating Corporate Speak: MOVI & BBI) given MOVI's performance since we released our market moving analyst reports. Same thing happened with..

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GOOG No Means Yes Baby Part 2

Read GOOG, No Means Yes Baby Part 1)

Quiz: Place the two statements in chronological order.

Statement 1: Google (Related Reports) Letter to shareholders-

We will make decisions on the business fundamentals, not accounting considerations, and always with the long term welfare of our company and shareholders in mind. Although we may discuss long term trends in our business, we do not plan to give earnings guidance in the traditional sense. We are not able to predict our business within a narrow range for each quarter. We recognize that our duty is to advance our shareholders' interests, and we believe that artificially creating short term target numbers serves our shareholders poorly. We would prefer not to be asked to make such predictions, and if asked we will respectfully decline. A management team distracted by a series of short term targets is as pointless as a dieter stepping on a scale every half hour.

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Mr Juggles Investing Commandments (#3 & #4)

In this installment (Read Mr Juggles Investing Commandments #1 and #2), the focus is what you can discern from a company's investor relations team.

Rule #3: Stocks with attractive IR women are no more likely to appreciate than average, but they are more fun to cover.

Stocks are, in the end, a good that is subject to the normal laws of supply and demand. A CEO who hires an attractive IR woman understands marketing and is stimulating demand; after all, his target demographic -- financial analysts at large investment firms -- is almost exclusively male and geeky. Unfortunately, these same CEOs have a propensity to overspend and have questionable judgement (tending to, say, sleep with members of the IR department). Thus, on balance, these stocks are not any more likely to perform better than stocks with unattractive IR women or men but, if you are in the aforementioned demographic, you are more likely to enjoy your time with the company. That's a net win for you. Half of investing is picking the right asset class.

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GOOG No Means Yes Baby Part 1

Analysts are apparently panting down the trail for some "hot Google action." Our attention was piqued by reactions of leading sell-side analysts to Google (GOOG) CFO, George Reyes, at a recent Merrill Lynch investor conference.

Reyes initially commented that, Google is "getting to a point where the law of large numbers starts to take root..." He continued to say that "At the end of the day, growth will slow..." and that "We're going to have to find other ways to monetize the business."

The sell side responded with comments including...

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Chinese Military TV Announcers

Pickup any newspaper and you'll see stories about the rapidly growing Chinese economy. Most observers also know that the Chinese advertising sector has particularly strong prospects since advertising tends to comprise a much smaller part of developing economies relative to developed countries and this gap closes over time. But pundits have overlooked another key driver for the Chinese media and advertising sectors: the military host. These military hosts were a secret until Long or Short ventured onto the mainland in order to obtain shots directly from the CCTV feed...

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Improving Our Diversity Metrics

Long or Short Capital continues to diversify ethnically which we think is crucial to any investing strategy. We have renamed Equity Private to Julio Mezzanine Tranche, but you can refer to Julio as "the Mezz," or alternatively, Senor Tranche. The last title may be a little too formal for Julio given his status in the capital structure and the extent of his legal rights, but we'll see, as the possibility always remains that he will be a real bitch in a workout...

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Shorting David Delainey

Former Head of Enron Energy Services, David Delainey has problems stemming from his admission to acts of perjury including lying to the FBI. But those are peanuts compared to the trouble he is in for spending years posing as Star Trek's "Commander Data," and pocketing thousands of dollars in appearance fees at various "Star Trek" conferences and events.

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Quotes Entirely Relevant to Investing CPA Accounting

This one goes out to all our hard-suffering CPA-studying accountant readers:

"Accountancy was my life until I discovered Smirnoff."
-Vodka advertisement from 70's

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Sellout Saturday: For Charity

So I was clicking on our banner for the Grameen Foundation, because it’s a great cause and I like to check it out every couple weeks, and when I clicked through, I saw a woman, probably a very poor one, holding up a phone right at me and I couldn’t figure out why. I looked closer at her phone and realized it was NICER than my phone...

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Overheard in Our (Fictious) Office

I overheard JD discussing his Long or Short Capital marketing optimization strategy with Dr. Gupta, who had asked about our transition from our old Blogger home:

"Overall, this strategy has led to a runrate of Google hits which has doubled for [LongorShortCapital.com] vs [LongorShort.blogspot.com]. We have lost the SE query flows from "Short Mexican Joke" and "Sexy Chinese," but I think we'll survive, especially because "Scone"...

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