Stole this part and parcel from a hilarious blog called Long or Short. Click on the title to go there. They make me laugh.
A hint, long is some kind of financial speak for "good opportunity to invest" and short is "bad opportunity to invest."
Pillow Pair Trade
By Mr Juggles
Long or Short Capital has completed extensive fundmental analysis of the pillow market. After surveys, studies, and focus groups a few conclusions have become obvious:
Pillows are most often used by consumers for sleep-assistance purposes although they can sometimes be used for back support and/or playful fights in sorority houses
The optimal Full Pillow Equivalent (FPE) to human head ratio is approximately 1.0x
Pillow pricing is directly proportional to the average number of frills per pillow as well as the number of fabric colors per pillow. Pricing is generally inversely correlated to the utility and comfort of a pillow.Some of these conclusions are surprising given the current state of the pillow market. For instance, in the US, FPEs per Human Head are running at almost 3.4x vs. the 1.0x optimal level. Note that this estimate includes almost 6 decorative pillows per household (or 1.2 FPEs)Meanwhile, FPEs per Human Head are approximately 0.1x in developing economies such as Malaysia and Zimbabwe and around 0.6x in China, the world's most populous country.We feel strongly that these trends will converge in the long term with the US (and Europe, to a lesser extent) reducing their consumption of frilly, non-functional pillows and developing countries upgrading from rocks to pillows for head support. Our surveys of starving third world citizens find that pillows run fifth on desired items following only clean water, freedom, blond hair and Pampers for the kids. This presents an attractive investment opportunity.Recommendation:We are recommending a pair trade: Go long pillow makers with emerging market focus and short domestic pillow makers.