Long or Short Capital Hits Another One Out Of The Park

The Genii at Long or Short Capital got it exactly right in today's tirade against things that are too long.

Long or Short Capital: Short Long

Using my “Why Quantity” investing screen on Bloomberg, I sent our analtern (analyst intern) to research length. His findings are that everything is at least 25% too long and range up to 1000% too long.
Examples:

• Conference calls are, on average, 57% too long
• Meeting are 123% too long
• Academic books are 432% too long — many could be boiled
  down to two pages without any loss of signal
• Reports to bosses are 231% too long, 488% if you adjust
  for the cost of time for the average boss

Really, what more do you need to know?

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Whole Foods CEO busted for trolling the internet

I was going to leave this story alone. I really was. I said to myself "Self," I said "You're better than this. You don't need to go there."

Of course, I rebutted myself with "Really? Then what about all that crap about Paris Hilton a couple of weeks ago?"

I had to admit, I had a point.

Anyway, this story has already been flogged all over the blogosphere, so I'll keep it short:

WSJ: Whole Foods Is Hot, Wild Oats a Dud -- So Said 'Rahodeb'
Rahodeb was an online pseudonym of John Mackey, co-founder and chief executive of Whole Foods Market Inc. Earlier this year, his company agreed to buy Wild Oats for $565 million, or $18.50 a share.
For about eight years until last August, the company confirms, Mr. Mackey posted numerous messages on Yahoo Finance stock forums as Rahodeb. It's an anagram of Deborah, Mr. Mackey's wife's name. Rahodeb cheered Whole Foods' financial results, trumpeted his gains on the stock and bashed Wild Oats.

Even if Mr Mackey did not issue material non-public information, or make statements that impacted Whole Foods' stock price, his behavior, while not necessarily illegal, is definetely unethical, and probably incredibly thoughtless. You might even call it stupid.

For starters: Yahoo! Finance? Good God, that's the lowest of the low. I used to think that bulletin boards devoted to bodybuilding, powerlifting and other iron sports were full of bizarre, damaged personalities, until I took my first forray into browsing the world of internet stock boards. "Bedlam" doesn't even begin to cover it. I've ranted about this before, so I'll leave it there.

Secondly, as the officer of a publically traded company, Mr Mackey has a duty to shareholders to disseminate information through appropriate channels. If nothing else, hiding behind a pseudonym and cheerleading your own company to investors is sleazy as hell. No amount of circumlocution or fuzzy logic on his part can rationalize his way out of this.

Needless to say, the usual suspects in the blogosphere have all drawn the same parallel, comparing Mackey's behavior to that of Overstock.com's perennially surreal CEO, Patrick Byrne.

Long or Short Capital: The Patrick Byrne Award for Operational Focus and Excellence: Whole Foods CEO Rahodeb
I’m undecided if it’s a better or worse call than being a bat-crazy Quixote in public like Byrne. This is less ethical but more competent as as opposed to more ethical and less competent. But this is decidedley worse than not wearing a condom in Haiti, which is our standard threshold for management competence.

Dealbreaker: Only You Can Stop CEO Internet Addiction!
It's happened before. As Gary Weiss has shown, some chief executives simply cannot be trusted with the internet. If you are working in the IT department at a public company now, you might want to look into disconnecting your boss's internet connection. It's for his own good.

Gary Weiss: John Mackey, Patrick Byrne, and a Snoozing SEC
Mackey, it seems, posted anonymously on message boards to bash a competitor and boost the company's share price -- amazing behavior that came to light not because of an SEC enforcement action, on any number of possible grounds ranging from securities fraud to Regulation FD, but in a lawsuit by the Federal Trade Commission.

Gary Weiss seems especially indignant that the SEC seems to be uninterested in the unethical behavior of either Mackey or Weiss' favorite poster boy for bad governance, Patrick Byrne.

I will however go out on a limb and say that the Whole Foods story will diverge from the Overstock.com train wreck sooner rather than later. I forsee that John Mackey will be sent packing by his own board, under pressure from regulators and the media.

Why?

Because Whole Foods makes money. Because they're successful. Because there will be a lot of concerned parties on Wall Street with a vested interest in making sure that Whole Foods continues to succeed. Now that Mackey has shown what kind of thoughtless, half-cocked decision making he's capable of, he's a liability. Those concerned will want to have him ejected before he does something that scuttles the ship.

Compare that to OSTK, whose vested interests are limited solely to buy-and-hold investors who still believe in Santa Claus, and are still praying that one quarter, any quarter, their baby will show a profit. If your company was as beneath most people's radar as Overstock.com, you might resort to public temper tantrums to get attention too.

Anyway, Mackey will be crucified in the media, and will probably get the sack before the month is out. There, I said it.

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Best Comment On Yesterday's Blackberry Blackout

Yesterday's Blackberry Blackout affected me not at all. Of course, I have expressed my disdain for being constantly plugged in on several occassions. So it should come as no surprise that I greatly enjoyed Long or Short Capital.com's perspective on the whole event:

Long or Short Capital: RIMM Jobbed

If this continues, Blackberry users worldwide will be unable to:

• 
  affect the veneer of importance in public
• 
  take time off from vacation to stay addicted to work
• 
  ignore unwanted conversations at work-related social functions
• 
  pay complete inattention during investment meetings
• 
  achieve new high scores in Brickbreaker [ed note: 24k, bitches!]
• 
  ignore their girlfriends in the name of “last-minute requests from the PM”

Ha!

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Universities Might Want To Revisit Their Fundraising Efforts

Long or Short Capital's Mr Juggles (I'm fairly positive that's a pseudonym) did a good piece last week about why his alma mater won't see another dime from him.

Long or Short Capital: Ways to Decrease Donations
So apparently my money went towards helping girls who aren’t good at math, renting a studio in the most expensive part of town so that hippies can paint, and holding an essay contest in the women’s studies dept!?! Since when does it cost money to hold an essay contest!? Incredible. Reading that makes me wish there was a money-back guarantee. I thought the money would go towards scholarships for poor kids or research in the sciences.

In addition to the sage advice that I left for him in the comments section, I got to thinking about the marketing efforts universities go to in order to convince the alumni to donate after I got an annoying phone call this weekend from a fundraiser.

When I politely told the girl on the phone (doubtless an undergraduate earning a modest wage in addition to gaining valuable boiler room experience) to remove my number from her lists, she got on the offence with me and started in with the threats: "Okay Mr Distad, but if I remove your number, you won't recieve any invitations to alumni events!"

Oh no, not that!

Let me say that the conversation didn't go well for her after that.

This isn't the first time I've had to deal with assholish sales tactics from the University of Alberta's Development Office. I got a phone call last year from a girl who right after introducing herself, launched into the assumptive close, asking if I wanted to donate $10, $50, or $100. When I said "none of the above" she came right back with "Great, would you like to donate a larger amount?"

I've seen better manners in the showroom of a car dealership.

When I told her that the amount I wished to donate was zero, she broke into the guilt close, which was "Don't you believe in supporting advanced education?" to which I replied, "I believe in supporting education, I don't believe in supporting bad salesmanship. Good-bye." *click*

I recognize that am an especial hard case, as I can see closing attempts coming a mile away (how do you think I got this wristwatch?) but do these hamfisted telemarketing scripts acutally work on anybody who was intelligent enough to get into university in the first place? They must, or they wouldn't insist on using them. However, I wonder if the lost goodwill from the bad taste they leave in the mouths of alumni like me who refuse to donate is worth it for them?

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If You Dine at Girl's Gone Wild, I Advise You to Pass on Seafood Wednesday

This just in from Long or Short Capital.com, the Girls Gone Wild video company is planning a chain of theme restaurants.

Last November I skewered Maxim magazine's plan for opening a restuarant chain, and pointed out how badly such a venture strays from their core business.* Like Deja Vu All Over Again, Johnny Debacle at LoS has much the same thing to say about Girls Gone Wild.

Long or Short Capital.com: Girls Gone Mild: Straying From Core Competencies
Recommendation: Girls Gone Wild was built on filming women stripping and/or going topless. Girls Gone Wild restaurants will not feature stripping, toplessness or filming. This is a textbook example of deviating from your core competencies. Despite our negative sentiments on the Girls Gone Wild BSR concept, we we are still bullish on the tasteless food service industry and recommend going long Pink Taco.


Is opening a chain of theme restaurants one of the leading indicators that your brand is on its last legs? I'm inclined to think so now. Keep your eyes peeled for exciting new restaurant concepts from GAP, Sony, and The New York Times.


*also note the cunning reference to one of Long or Short's key business principles in the previous tirade.

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And the Award for Hardest Earned Punchline by a Finance Blog Goes To...

Long or Short Capital.com, for the most convoluted lead in that nevertheless still delivered a satisfying punchline.

Long or Short Capital.com: Swiss Get Whores
The number of people offering sex for money has risen by a third in Zurich and 80 percent in Geneva since Switzerland opened its borders to workers from the 15 EU-member states at the start of 2004, police estimate. Some lawmakers predict prostitution will grow even more after the government last year removed work restrictions for residents from 10 newer EU countries as well.

Make sure to read the whole thing.

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A brilliant hedge strategy from Long or Short Capital.com

The wizards at Long or Short Capital have done it again. With insightful analysis they've recognized a hedge that you too can play.

Long or Short Capital: Long Bob the Builder, Short the Sodor Railway

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Don't work for your grades, make your grades work for you

The evil geniuses at Long or Short Capital.com have outlined a clever strategy for getting a leg up in the job market: adjusting your GPA on a pro forma basis.

It appears that students have realized what investment bankers have known for years: if you don’t like a number, you can change it.

Say you are an investment banker at a large Wall Street Firm, like Silverman Sachs or Layman Brothers, and you are trying to syndicate Theoretical FCF Corp’s bonds. The problem is that Theoretical FCF Corp seems to lack any actual cash flow and will almost certainly never actually pay down any debt. What do you do? Just pro forma their EBITDA to what their cash flow would be if they actually generated cash flow, as you kinda expect they may sometime in the future.

Now for a student, their GPA is basically the equivalent of a firm’s 4 year trailing cash flows. The number itself carries huge weight in job interviews, yet for decades students have reported GPA exactly as it appears on their transcript. While entirely accurate, this is a huge mistake. Job applicants are now realizing that adjusting their GPAs can give a more accurate misrepresentation of their performance and expected future production.

Just read the whole thing!

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RIAA sues ALLofMP3.com for US$1.65 trillion, says: "Go Big or Go Home!"

TechCrunch.com: AllOfMP3 Responds To RIAA’s $1.65 Trillion Lawsuit, reported on by LongorShortCapital.com.

The RIAA, having decided that suing dead people and little girls isn't ludicrous enough, have opted to go for broke: history's largest civil damages claim, filed in the USA, against a company with no US presence, which is obeying all the laws of the nation in which they operate.

Got that?

Long or Short Capital's analysis of the claim lays bare its fundamental worth:

If AllOfMP3.com has destroyed $1.65 trillion of value or committed acts worth $1.65 trillion in punishment, there is implicit in that the idea that the RIAA stakeholders are worth a minimum of $1.65 trillion plus whatever fair market values would peg them at. A quick perusal of the enteprise values of the constituents of the RIAA make it clear that they are not worth even $100bn, much less 16x that.
Also implicit in the $1.65 trillion number is that AllOfMP3.com has sold somewhere close to $1.65 trillion worth of music in its 3-4 years of mainstream existence. In 2004, there was $30-40bn of total music recording sales (and the RIAA does not represent all of that figure). The GDP of Russia is about $1.5 trillion. In 2005 there were $1.1bn of digital music sales. So in 3-4 years, AllOfMP3.com did the damage worth the revenue equivalent of 40-55 years of total music recording sales or 1x the GDP of Russia.

There's really nothing else to add here. No one, not even Dave Barry could make this up. If the trend of surreal news stories continues to prevail, it bodes ill for media outlets such as The Onion, since satire and reality have become indistinguishable.

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Back in the saddle

I'm finally back, after a full dance card of work and family commitments.

Let's catch up:

Home Depot's Bob Nardelli suddenly resigned yesterday, throwing retail watchers and analysts into a tizzy. HD isn't doing too poorly, and the reasons for Nardelli's departure are unclear, although it's hard to feel too bad for a guy getting a US$210 million severance package.

Pioneering canadian retailer John Forzani has retired as chairman of the $1.3 billion dollar sporting goods empire that he created. He is 59. Through agressive expansion and aquisition, Forzani created a retail giant, with 14 banners and ubiquitous market presence. Now that, like Alexander, there is nothing left to conquor, he appears to be giving up the reins, and there is idle gossip that Forzani Group Ltd is a potential takeover target for either a large american retailer, or an agressive Private Equity group.

A disturbing trend I noticed in Christmas advertising was starting Boxing Day sales the week before Christmas. Chief amongst the offenders where struggling retailers like HBC, whose pre-Christmas Boxing Day ads whiffed of desperation, but even strong performers like Best Buy/Future Shop got in the game also. If we push the official start of the holiday shopping season back from Hallowe'en to Labour Day, then we can start the Boxing Week sales right after Canadian Thanksgiving!

Always contrarian in their outlook, Long or Short Capital.com's analysts have determined that nerdiness in a CEO has serious downside. This comes at a time when nerds are enjoying greater public popularity than ever.

There's been an amazing amount of whining and hand wringing in the Old Media about wealth: from executive compensation to Wall Street bonuses, and so on. Most of it reeks of jealosy, so I'll offer journalists and aldermen a helpful tip: if you want to make more money, do something that generates more revenue and profit than you already do.

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Long or Short Capital

http://longorshortcapital.com/

Honestly, I regret not linking to these guys earlier. They are geniuses (genii?). They know how to get it done.

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