1-2 Knockout

1-2 Knockout Derivatives & Structured Product Desk: Yahoo! Clusterf*ck Notes

  We here at 1-2 Knockout are constantly striving to deliver innovative financial products that allow our clients to exploit profit opportunities tied to events and special situations which have historically been overlooked by most "real" Investment Banks.  It is thus with great fanfare that we bring your our newest, sexiest, sure-fire profit instrument: 

Yahoo Clusterf*ck Notes (herein, "Yuck! Notes").

Essentially, these OTC Notes are designed to fluctuate in price based upon the level of our proprietary Clusterf*ck (TM) Index.  The Clusterf*ck Index is calculated based on a complicated algorithm which uses a variety of factors as inputs, including:

• Our proprietary measures of:
  • Steven Balmer and Jerry Yang's alcohol/illicit drug consumption (ml(or mg)/day)
  • Size of Sergey Brin and Larry Paige's smile (in cm's)
  • Implied uncertainty of any deal happening, as measured by Schrodinger's Cat
  • Probability that Yahoo! is worth more than the 50%+ premium offered by Microsoft (approx. zero)
  • # Days of rain in Redmond, Washington in the past rolling 30-day period (you'd be ornery and stubborn if you lived there, too)
  • A variety of other factors, see your prospectus for complete details.

In order to ensure ample liquidity, 1-2 Knockout will be acting as sole market maker (although our seperate dark pool will be available on an as-needed basis).  Offer/ask prices will be posted daily to the Yahoo! Finance Message Boards (where Rahodeb is a restricted person, so as to avoid any potential for manipulation). 

Our Research Desk has been conducting several days of Monte Carlo simulation, and sees the Yucks! trading hire as uncertainty, rain days, smile size, and alcoholism increase, and lower as probability-weighted value of Yahoo! increases.  Also, the Desk sees the emergence and involvement of senile 3rd-parties in the Clusterf*ck as a stabilizing factor (which is ironic given aforementioned senility), but warns that this may simple represent the eye of the storm, so-to-speak, where an inevitable Clusterf*ck is merely averted (or partially mitigated) in the short-term, only to result in a massive Clusterf*ck spike down the road.

Yucks! are marginable to 10x, with applicable level-3 collateral posted as the Notes are marked-to-"model" weekly. 

Yahoo Clusterf*ck Notes: Ride the F*cking Wave to HUGE Returns!

Disclosure: Anal_yst uses Yahoo! Finance (and select other "services").  Yuck! Notes are not SEC-registered investment products and should not be treated as such.  Asterixes make these ideal family-friendly securities, great for Bar-Mitzvahs, Weddings, Communions, and obviously Brises.  Consult your Financial Advisor. 

Hannah Montana Downfall Futures: The End is Nigh

Just last week our Miley Cyrus Downfall Futures ("MCDF") contracts spiked to record levels on the release of some racy photos of the Disney Star.  Well, it seems the teen icon has wasted no time in outdoing herself, as today saw the release of pics from a Vanity Fair photo shoot, depicting the topless icon, covered only by a small blanket. 

As expected, trading in all maturities of MCDF shot through the roof, with the longest-dated maturity, November, 2010 reacing the $1.00 level, implying a 100% chance of 'default' by her 18th Birthday.  Perhaps more interesting though, our market makers have noticed that even the short-dated maturities, as close as November, 2008 are trading at $0.96, as it appears speculators have lost all faith in Miley to avoid the same fate seen by other lolita stars such as Britney Spears, Paris Hilton and Lindsey Lohan.

Our pretend Proprietary Research ("p-PR") desk suggests those who are long the contracts stay that way, however, for the more bold traders out there could have an opportunity (albeit a miniscule one) to make windfall profits with a short trade.  We see this contrarian strategy being EXTREMELY risky, as all available data indicate MCDF contracts will reach default status long before the terminal maturity.

Reminder, from your summary prospectus, the following will constitute a Downfall, or Default Event:

• Drug/alcohol use (abuse)
• Sex scandal of any sort
• Caught hanging out in public with any of the following:
  • Paris Hilton
  • Brandon Davis
  • Lindsay Lohan (immediate downfall trigger)
  • 1-2
  • etc

• Stint in rehab/counseling
• Sudden drastic changes in behavior (e.g. Britney Spears)
• Other, similar things, see prospectus for details.

Disclosure:  Anal_yst is long and strong MCDF contracts. 1-2 is doing his best to make this happen in a timely matter for our Investors.  Consult your Financial Advisor.

Knockout Capital Partners Activist Fund I, LP Announces its First Target: Beer!

So, the past week I've been checking out a few of the companies that I expected would do well in a recessionary (real or imagined) environment.  I tried to take into consideration companies that would (slash did) see real improvement, as well as those into which I expected to see a cyclical movement as investors and portfolio managers rebalanced their positions/weights.  Obviously, I started at the usual defensive plays: Healthcare, consumer staples, discount retail, and especially vice (namely alcohol, tobacco, gambling, defense, and sex - although some sort of nonsensical social "norms" prevent us from capturing most returns from the latter through public equities).  Sparing the details of my far-from-exhaustive analysis (and the focus on vice), I came upon a company whose products I both know, and love: Anheuser Busch (NYSE: BUD).  Below, you'll see the chart for the stock, going back to April, 2001.

That trendline is right about $48, and its clear that the stock is essentially flat since the beginning of 2002, short-term fluctuations not-withstanding.  Without getting into company-specific issues (of which there are at least a handful, see the last 10-k/MD&A if you're feeling ambitious), this is a company which pays a stable dividend, with decent-to-good financial performance (increasing EPS, manageable debt, blah blah), that makes beer.  BEER.  What is bad about Beer?  Even Benjamin Franklin, who would know such things, agreed when he said (something to the effect of) "Beer is proof that God loves us and wants us to be happy!" (attr).

See, the only real problem I see with BUD is right there on the 1st page of Part I, Item I of the last 10-k.

Approximately 93% of the Company's net sales and 74% of net income is generated in the United States.

Without getting too technical here, this tells us two very important things:

1. BUD is not very geographically diversified.  They get the vast majority of their revenue from domestic operations.
2. Their relatively-insignificant international sales are significantly more profitable than are their domestic sales.

Flipping to pages 2 and 3, we find that the Moose from St. Louis (as its known) has also been 'experimenting' with new things, for example:

Michelob ULTRA Lime Cactus, Michelob ULTRA Tuscan Orange Grapefruit, and Michelob ULTRA Pomegranate Raspberry, Michelob Pale Ale and Michelob Porter, Michelob Marzen, Michelob Bavarian-Style Wheat, Michelob Honey Lager, and Michelob Golden Draft and Michelob Golden Draft Light, O’Doul’s and O’Doul’s Amber (ed: who the hell drinks non-alcoholic beer???), BACARDI Silver Watermelon, BACARDI Silver Strawberry, BACARDI Silver Raz, BACARDI Silver Mojito BACARDI Silver Mojito Pomegranate and Tilt, BACARDI Silver O³ and Tequiza, BACARDI Silver Peach, Tilt Green, Intensitea Lemon, Intensitea Raspberry and Intensitea Peach and Wild Blue.

Believe it or not, this is a CONDENSED list.  Seriously, I'm not making any of that up.  We (I) have been known to enjoy our libations, in many different states (no pun intended), but never when wandering the aisles of our Nation's liquor stores have we laid eyes on at least 1/2 of these products, let alone actually seen a real, living, human being consume them. 

Now, just to get this out of the way, BUD is pretty conservative company.  Financially, operationally, and just generally.  Sure, they've had a few strike-outs, such as, oh, I dunno, Michelob Ultra Tuscan Orange Grapefruit, but these are mere hiccups in the grand scheme of things.  Now, I'm not suggesting a Barbarians at the Gates, Gordon Gekko, liquidate the thing approach here.  No, I'd just merely like to point out a few things any 21-year old college kid who's passed a Business & Industry Analysis class should know. 

Knockout Capital Partners, therefore, suggests the following:

1. Expand International operations.  Cut the crap with these multi-billion stock buybacks. 
2. Eliminate ancilary brands.

Our sophisticated financial models suggest that taking our advice will increase EPS roughly 'alot' over the next fiscal year, and 'even more' in further periods.

We will be filing our 13d in the coming days/weeks/etc, but in the meantime, you might want to hop on that, ya know, hint hint, wink wink...

Disclosure: This is not investment advice.  Knockout Capital Partners, Anal_yst, their representatives and the like do not (currently) own shares of BUD (although they may contribute substantially to the Company's sales).

1-2Knockout Derivative & Structured Products Desk: Hannah Montana Downfall Futures

By: Anal_yst

We here at 1-2Knockout would like to inform you, our clients (real or imagined) that we will be commencing trading in our newest product offering: Miley Cyrus Downfall Futures ("MCDF")!  The newest and most efficient way to trade Hannah Montana!

We will be offering a variety of maturities in our MCDF contracts, currently going out to November 2010 (which is coincidently when she turns 18).  Prices will be quoted from par ($1.00 implies 100% probability of downfall by expiration), where the 'strike' (so-to-speak) will be based off the definition of downfall found in your (non-existent) prospectus.  MCDF are marginable and are short-eligible (although why anyone in their right mind would place such a trade is questionable at best).   To summarize though, any of the following will constitute a "downfall":

• Drug/alcohol use (abuse)
• Sex scandal of any sort
• Caught hanging out in public with any of the following:
  • Paris Hilton
  • Brandon Davis
  • Lindsay Lohan (immediate downfall trigger)
  • 1-2
  • etc

• Stint in rehab/counseling
• Sudden drastic changes in behavior (e.g. Britney Spears)
• Other, similar things, see prospectus for details.

Risk factors to consider are limited, as our abstract research desk (on loan from Long or Short Capital, shhh) has informed us that for longer-dated maturities, MCDF contracts are highly likely to yield outsized returns.  Insofar as any investment or speculative product can, it is our view that MCDF represents as close to a "sure thing" as any we've seen to date*, and that "its only a matter of time".  For reference though, risks include:

• Billy Ray Cyrus/non-abusive/psychotic family
• Disney
• Her continued ability to avoid hanging out with the Olsen Twins
• Religion

Mylie Cyrus Downfall Future contracts.  Long debauchery, short wholesome family goodness.

* Neither Anal_yst or 1-2Knockout, or its representatives recommend any particular investment or investment strategy.  MCDF contracts are (currently) abstract and do not actually "exist".  Consult your investment advisor before making any investments (either real or imagined).