A candid meeting of minds about subjects varying from making money in the markets to the vagaries of the human psyche to the philosophical aspects of man and much more...
We had a wonderful meeting today at BJ’s Restaurant and Brewery! We had a total of 7 attendees: (from left to right) Andrew Whatley, Jeff Harrington, Greg Bartell, VJ Arjan, Elena Swindull, Ryan Zamora, and Kevin Day.
Vertex Pharmaceuticals (VRTX)
Congratulations to Jeff Harrington on his homerun pick of Vertex Pharmaceuticals!
There really is no reason to go into the news, the chart spells it all out, but for those who are curious: The huge move that occurred recently was due to the news released of the schedule approval of its drug that has a high percentage of curing Hepatitis C by the FDA. Jeff’s strategy was to play this stock by buying the March and April call options at a $45 strike price. The least that would occur is that he would lose his premium. By his own admission, Jeff’s return on investment was at least 1000%; not a bad return in about 60 days. To his credit, he had been following this drug for over 4 years. He even sent an email to the Scarlet Kings before the price shot up. It finally paid off for him and we at the Scarlet Kings could not be more thrilled for him. It simply serves as a lesson to many of us about the power of patience and perseverance.
Dubai
VJ Arjan took a 10-day long trip to Dubai and explained his observations of the situation from the perspectives of those living there.
There is no doubt that it is a very beautiful city. Even when you are descending into the Dubai International Airport, one can see the evident money that the Sheikh put into to create an aesthetically pleasing city. When landing, from the outside, the city looks just like a New York or London.
There is also no doubt that the oil money flows very richly. There are Ferraris, Bugattis, Lamborghinis, all over the place.
However, on the floor, amidst the people, there is something much deeper going on. There is a system similar to the caste system in India. The “Locals”, who are the Arabs that are native to that region are at the top of the totem pole, while everyone else, Indians, Pakistanis, Chinese immigrants who make up 80% of the population there, really have no rights whatsoever. The Locals have been known to openly discriminate against the non-Locals.
• Citizenship for non-Locals is not permitted.
• Property also, except in limited cases, cannot be owned by a non-Local. One has to take out at 99-year lease on the property. Kevin Day noted how in Mexico as recent as 25 years ago, it was also not permitted to own property, but things have changed since then. Perhaps, this is what will occur in Dubai also.
• Businesses cannot be wholly owned by a non-Local either. Instead, one has to have an Arab that is a silent partner that owns 51% of the proceeds whether he is an active participating partner or not.
The economy can be described to be on cruise control. The youth spend a good deal of their time at shee-shah joints, which are hang-out spots where people smoke and socialize. It is not uncommon for many of the youth to simply take over their parents existing businesses.
For the moment, the high oil prices have led to a relatively sustainable lifestyle for the inhabitants there. VJ also felt that the Sheikh Al-Maktoum certainly deserves credit for catapulting Dubai, which was just a desert 20 years ago, onto the world stage. He has certainly made many mistakes, but he’s done a good job given his lack of experience in capitalism.
Libya and the Middle East
Kevin believes that Mouammar Qaddafi has to go. He has clearly lost the support of his people and even among the international community, he has been pressured to leave. Kevin believes that it is not a question of if, but when. Just as in Egypt, he is still concerned about the person who steps in after Qaddafi is gone and he hopes that it not be anyone from the small but vocal radicalized group.
Also asked about whether there would be protests in Saudi Arabia, Kevin believes it to be very unlikely. It is understandable if one is living on two dollars a day to protest, but if one is relatively comfortably provided for, as are most Saudis, then it is like protesting the fact that everyone is driving a Toyota and are not driving a Lexus.
That being said, there is still the possibility in Iran and Yemen for an uprising to turn ugly.
The 2012 GOP Candidate – Who? The lack of a viable GOP candidate has Kevin Day, like many Republicans, very frustrated. The ones that are scheduled to run are simply too polarized, although they may have a very loyal following.
In a rare display of sympathy toward the Democratic party, Kevin expressed how President Obama deserves some due credit for moving more to the center after November elections forced him to re-evaluate what the American people wanted. But, he still fears it a little too late for him and that Hillary will run in his stead for 2012.
Reading Between The Lines
Greg Bartell was explaining his take on President Obama's recent speech on how the economic recovery is fueling growing exports. What was not detailed in the speech were what exactly accounted for these exports. Greg explained in an excellent fashion that the U.S.'s chief exports are weapons and during the past couple of years, major weapons deals have been arranged with the Middle East, China and India.
As a side note, technology, health care, and tobacco are also chief components of what the United States exports to the world.
Cutting The Deficit
This topic has received much attention since the government dolled out hundreds of billions and trillions of dollars to prop up the investment banks which came to threaten the global economy. The question is do we, the American people, want our children and grand-children to deal with the mistakes of their parents and grand-parents?
Cuts have been proposed to bureaucratic measures, education, and defense spending among other areas.
But little has been discussed about the two largest components of the U.S. budget next to defense, Social Security and Medicare/Medicaid. Kevin believes that these systems must be reformed to close out some loopholes.
For instance, Kevin believes that there must be a means test for recipients of Social Security. Kevin is, by his own admission, very well provided for and he and his wife still receive Social Security benefits. There are many more who also are in the same financial situation who receive these benefits, who do not necessarily have to. This money could certainly go to reducing the deficit and is a loophole that needs to be closed out.
Kevin has even suggested getting rid of these entitlement programs altogether so as to not drive our country deeper and deeper into debt.
Elena Swindull expressed, however, that it is also about the votes, so it is hard to imagine getting rid of Medicare, Medicaid and Social Security as it is not politically feasible to do so.
Lack Of Accounting Transparency For U.S. Firms Ryan Zamora, who recently moved from the Phillipines, remarked on how difficult is investing in U.S. companies compared to the Phillipines as the balance sheets and income statements give so much room to interpretation. In the Phillipines, these statements are much more black-and-white. Cash flow statements can even detail relatively minor expenditures for its shareholders for clarity and transparency.
Japanese Earthquake
On the morning of March 10th, 2011, Japan was hit by an 8.9 magnitude earthquake; some have called it the most powerful earthquake in Japan's history.
The preliminary death toll estimates measure as low as 400, as high as 900. And this number is really quite astonishing. For comparison, the 2010 earthquake in Haiti was less powerful, a 7.0 magnitude quake, and between 100,000 and 300,000 people died.
One of the prime reasons why the toll was so much lower in Japan while being directly in the middle of a techtonic plate fault line, is in how the Japanese build their buildings; they have a swivel at their foundation to limit the effect of the tremors of an earthquake.
Without taking away from the tragedy of the loss of human life, the fact that amidst so powerful a quake the casualties may be less than a thousand is an incredible testament to the technological capability of the Japanese to build a city that can withstand a natural catastrophe of this magnitude with truly little human damage.
It seems that Man may finally be moving in the direction of becoming master of nature and that in the very near future, men and women will fear little the catastrophic possibilities of nature, so far our technology will have progressed.
The next meeting will be on Sunday, April 3rd, 2011. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com
