Next Meeting of the Scarlet Kings

Greetings to All,

The next meeting of the Scarlet Kings will be held on

Sunday, January 2nd, 2011 at 12:30PM.

Location: Chili's (4500 Belt Line Road, Addison, TX)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Meeting Minutes

We had an insightful and philosophical meeting today at Romano’s Macaroni Grill! We had a total of 4 attendees: (from left to right) VJ Arjan, Kevin Day, Jeff Harrington, and Andrew Whatley.

As the year 2010 comes to a close and we sit and count our profits for this year like the last, we all remarked how we have grown not only financially, but personally as well.

Europe Back in Trouble Again

Ireland was recently fronted $89 billion from the United Kingdom to quell the fears of major defaulting of its debt portfolio. VJ Arjan remarked how during the Ireland bailout, the Spanish Prime Minister Jose Zapatero exclaimed that there was “absolutely no chance” that Spain would seek another bailout from the EU, which indicated to all of us that Spain will definitely need one. And if Spain will need additional bailout funds, Kevin Day indicated, then so will the other members of the PIIGS.

On another note, the U.K. is finally starting to initiate some austerity measures with the ascension of Conservative Party member David Cameron. Germany is doing this as well and encouraging the other members of the EU to do the same. Kevin feels that the U.S. will eventually adopt these types of measures also, as the American people are becoming less and less tolerant of additional deficit spending.

Jeff Harrington posed that one potential way creating this type of austerity measure would be to increase the gasoline tax from 15 cents per barrel to 30 cents. Given that crude oil prices are continuing their upward trend, this 15 cents could very rapidly add to our government’s coffers.

Wikileaks

Julian Assange, former Australian and current head of the WikiLeaks organization was the topic of debate. By releasing hundreds of thousands of documents revealing the inner workings of the U.S. and other world governments, is he doing his best to fulfill a needed civic duty or is he abusing the right to free speech by endangering armed forces and informants throughout the world?

We did not think that one would be justified in engaging in a completely unrestricted right to free speech. Kevin Day said, for instance, it is within one’s right to yell the word “Fire!” in a crowded theater but is morally reprehensible at best and even criminal at worst to do so. This wouldn’t be the case, however, if one expresses his or her right to speak freely and it does not affect anyone else directly. It is only when one exercises one’s right to free speech and this affects the livelihood of other individuals that there would be a problem.

Part of his motivation, we believe, may have been to reveal the politicking that occurs behind the scenes to the public at large. We found out, for instance, that Saudi Arabia has been secretly encouraging the U.S. to invade Iran and Lebanon to destroy the threats of the Ahmedinajad and Hezbollah regimes, respectively. We also know that North Korea curries virtually no backing from China who is anxious to get rid of a possible nuclear threat.

The January Effect and the Start of a New Decade

The January Effect may have already started. Mutual funds are anxious to ride the market up to higher heights so as to make their year-to-date performances look better and the retail sales since Black Friday look very promising.

It is also interesting to note that many financial crises culminate at the end of a decade (70's - surging commodity prices; 80's - savings and loan; 90's - dot-com boom; 2000's - residential real estate bubble). If history has been any guide, then perhaps there will be a decade of prosperity ahead of us at least until the end of that decade. :-)

Economic Rebuilding

Kevin Day, who was a founding member and used to be chair of Reno’s Economic Development Room, visited Reno for one of their periodic meetings. The situation is certainly dismal.

· 40% of the homes are in foreclosure

· Unemployment is at 15%

· The main thoroughfare in Reno, Virginia Street, basically looks like a ghost town. Casinos after casino are shuttered, and restaurants are open 2 to 3 days in a week.

Kevin explained that the situation in Las Vegas must be far worse given the heightened real estate speculation there.

But despite these incredible challenges, the forum discussed possible future ventures that would be heavily invested in alternative energy technologies like geo-thermal, solar, and wind energies.

The Market

Kevin Day made some predictions as always about the market for the coming months. He believes that in the short-term, there may be profit-taking for those who are trying to take advantage of the current long-term capital gains tax as there is a threat that this could be increased to an ordinary income tax in the future. But the overall market trend should still be upwards until the end of Q1.

Crude oil, precious metals, agricultural commodities and emerging markets should all continue to rise. Retailers and regional banks should also continue to rise as they have been battered badly during the recession.

Unemployment, however, will continue to take time to decrease. In fact, during last month’s FOMC meeting, Mr. Bernanke stated that it could take up to 6 years for unemployment to decline to normal levels.

The Scarlet Kings Muse

In truth, the above only comprised a small portion of the meeting. Jeff Harrington kicked it off by setting the tone for a very philosophical meeting. I will try to elicit some of the poignant questions that arose during that conversation, which may serve all of us well to remember.

Of the many things mental characteristics that we have learned to emulate is would be how successful and wealthy individuals think. As Zig Ziglar says, the reason why some people succeed and some fail is because of the thing between your ears, your mind.

But to repeat positive self-talk alone will not assure success in itself.

If one tries to remain upbeat although one is basically a negative person, the person will not change and fundamentally will remain a negative person. To draw an analogy, the positive thoughts could be similar to a banana peel. No matter how hard the peel tries to change the banana itself, it cannot do so.

What is required, we discussed, was an internal change of how one views oneself. (*Herein, we believe lies the secret of all achievement and success.) There is a perennial saying that has been repeated throughout many cultures all over the world over the centuries which can sum this up: “Know Thyself.” The reason why some of the most powerful movers and shakers of the world would have little use for positive thoughts is because their very self serves as the rock and foundation for their being. This requires complete honesty and an ability to accept oneself as he or she is.

Ask yourself, when I look at myself in the mirror, do I like and admire the person that I see? This is how the inner self is changed.

Asking this question can also mean that I see myself as a human being that has flaws and the ability to make mistakes: that I am not perfect, but that this is okay. Nobody is perfect and to make mistakes is a part of life and our very being. To embrace this aspect of ourselves then is a very important part of “Know Thyself.”

Those who have held themselves accountable to the lens of perfection could be uncomfortable about who they are and may be afraid to make mistakes. It may be prudent to remember a quote from Thomas Watson Jr. the president of IBM who made this company into the industrial titan it is today:

“It’s quite simple, really. Double your rate of failure. You’re thinking of failure as the enemy of success, but it isn’t at all.”

The next meeting will be on Sunday, January 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

Next Meeting of the Scarlet Kings

Greetings to All,

The next meeting of the Scarlet Kings will be held on

Sunday, December 5th, 2010 at 12:30PM.

Location: Romano's Macaroni Grill (4535 Belt Line Road, Addison, TX)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Meeting Minutes

We had a wonderful meeting today in the outdoors at The Saffron House! We had a total of 7 attendees: (from left to right) Tommy Schultz, Andrew Whatley, Earl Landry, VJ Arjan, and Kevin Day. We also had Jeff Harrington and Jack Gammon join us briefly later on.

Congratulations to Andrew Whatley!

After successfully passing the Bar examination on his second attempt, our own Scarlet King, Andrew Whatley, is now a full-blown lawyer! The Bar is an incredibly difficult test consisting of 5 three-hour sessions and we are all thrilled that he passed it.

Also, due to his generosity and dramatic increase in his income, we would like everyone who reads our blog to know that he will be paying for all meals for each attendee from here on out!

(Just kidding of course, but congratulations nonetheless.)

Mid-term elections

We discussed the landslide winnings for the Republican party which led to their majority in the House and a significant blow to the Democrats in the Senate. It will be interesting to see what happens in our political environment now given that President Obama will be forced to work with the Republicans as opposed to sidelining them.

Kevin Day, however, predicts that given that President Obama has a conviction to push his Socialist agenda, there will be very little that can or will be accomplished as bipartisanship will be even more divisive.

News around the world

There were several key events that took place:

Europe

France erupted recently when due to austerity measures President Sarkozy was forced to put through legislation that would increase the retirement age from 60 to 62. VJ Arjan was explaining how this clearly shows that the people of particularlyWestern Europe have embodied the entitlement mentality and that there will be some very hard lessons to learn in the future. Mr. Sarkozy has one of the lowest historical ratings for a French President at 26%. Kevin Day stipulated how this retirement age could be further pushed back to 65 also given the incredible budget deficits France is currently running.

At least, however, he is able to initiate some policies to comply with Mrs. Merkel’s “tax and axe” measures. Greece is getting enormous pressure from the European Union to do the same but is finding this task much more difficult. In fact, they are schedule to run deficits of at least 10 percent of GDP in 2010.

China and Australia

In a surprise move, both China and Australia’s Central Banks raised their benchmark interest rates. Although the consumer confidence in both countries are still very low, it is helpful to remember that the unemployment rates in these countries is relatively low, around 5-6% compared to 10% in the U.S. and upward of 15% in Europe.

Robo-foreclosures

Earl Landry and Andrew Whatley were discussing the future of the so-called robo-foreclosures. Due to the record number of foreclosures throughout the country, there have been several thousands of loans that may have been wrongfully foreclosed upon due to shoddy processes and mishandled paperwork. Andrew continued to explain that due to the volume, it is extremely difficult for managers to review each and every case and this has led to some expedited processing.

They do not see this turning into an avalanche of lawsuits, however, and feel that there are periodically newer and better processes being released to deal with these situations. Although for the moment, there will be issues, these are slowly but surely being resolved.

Precious Metals, Emerging Markets, and Agriculture

Kevin Day has been calling these three sectors for months now and finally all three have been exploding particularly silver for precious metals and sugar, corn, and wheat for agriculture. Kevin also feels confident that the market run should continue at least until the first quarter of next year. Below are some charts of these plays:

SGG - Sugar Futures ETF

HL - Silver Miner

VWO - Emerging Markets ETF

Potential Market Plays

Kevin Day was discussing some potential market plays that would be prudent to take advantage of currently:

• F (Ford)
• CHN (The China Fund)
• TWN (The Taiwan Fund)
• GDXJ (Junior Gold Miners)

’30-40-30’

Kevin Day suggests entering a position on a given stock by breaking the amount into 3 segments which he calls ’30-40-30’. One enters 30% of the total amount one wants to invest at one price, then 40%, and then the remaining 30%. In this way, one tries not to pick a bottom or top and instead gets an average.

The Future of India

As someone who has an inside view of the Indian culture and psyche, VJ Arjan explained what he sees are some of the potential opportunities and also some overwhelming stumbling blocks in its future.

The Indian people are some of the smartest, hardest working individuals on the planet. They are well-educated in the subjects of mathematics and science and have the ability to be workaholics.

However, the challenges far undermine the potential. Although they are a competitive people, the competition reaches the levels of pettiness such that even among siblings and friends there is competition to be better, to receive higher marks, or to make more money, etc. There are literally mass student suicides right around examination time and particularly in cities as families expect the best from their children and also to be able to represent the highest social status to others in their clique.

Unfortunately, there is still, even in the cities, evidence of caste discrimination. There is also the feeling of great pride and a belief in the superiority of the Indian race.

All these factors, which are rooted deeply within the Indian culture will become major challenges that will confront India as they decide to play a larger and more potent role on the world stage.

The next meeting will be on Sunday, December 5^th, 2010. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com

Next Meeting of the Scarlet Kings

Greetings to All,

The next meeting of the Scarlet Kings will be held on

Sunday, November 7th, 2010 at 12:30PM.

Location: Saffron House (5100 Belt Line Road, Suite 278, Addison, TX)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Meeting Minutes

We had an interesting and debate-worthy meeting today at BJ’s Restaurant and Brewery! We had a total of 7 attendees: (from left to right) Jeff Harrington, Kevin Day, Tommy Schultz, Andrew Whatley, Jack Gammon, Robert, and VJ Arjan.

China’s Geopolitical Skirmish with Japan

Recently, China was caught flexing its geopolitical muscles over fisherman caught by the Japanese in Japanese waters. Although the exact location of the fishermen was disputed by both sides, in a rare display, the Chinese demanded an apology from the Japanese and threatened to take “immediate action” if the fishermen were not returned and duly compensated for their time. The Japanese, of course, refused to issue an apology or compensation but did eventually give over the fishermen.

Kevin Day believes that this affair was an exaggerated affair in which China intended to “rattle its saber.” The event is predicted to cast very little effect on the diplomatic relations between the two countries although it may have induced some minor tensions.

Silver, Gold and the Media

VJ Arjan was explaining how he always gets leery when he sees current or potential market opportunities being advertised on financial news networks. Today, it is hard to watch Bloomberg, CNBC Money, or Fox Business without hearing the words, “Buy gold and silver.” Historically, whenever the public gets in, the prudent thing to do is to sell. It was the same when famous investor Bernard Baruch started to hear stock tips from his shoe-shiner that he predicted a crash was imminent. He asked whether or not this was the same for gold and silver and whether there was a bubble forming.

Jeff Harrington and Kevin Day explained that as long as the fundamentals of fiat money does not change, there is no other option but for gold and silver to go up. Kevin Day predicts that to see gold at $2500 is quite possible, but that after that the metal may exhibit bubble-like qualities.

Santa Fe’s Incredible Acquisition

Recently, in the last week matter of fact, Santa Fe Gold Corporation announced on its website that it was in the middle to completing an acquisition that will literally double the net worth of the company overnight.

Jeff Harrington explained that, reportedly, they will be buying 7 companies rich in gold deposits for the equivalent of 8.9 million shares. The kicker is that according to their estimates, these properties are so rich that the price per ounce of gold would come out to around $20 per ounce! (The spot price for gold closed at $1318 on Friday, October 1^st.)

This only bolsters the support for this company even further. However, we will have to wait until the companies have been acquired to see if this will truly pan out.

The Next Six Months

As usual, we asked what Kevin Day’s famous market nose was telling him about the next six months. Here’s what he had to say:

· Economic signs point that the market will be in a healthy uptrend until at least the 1^st quarter of 2011.

· Commercial real estate is still the next shoe to drop and residential real estate still has not bottomed out

· Unemployment will be the main issue that the country will have to face for an extended period of time. This will lead to a slow but gradual recovery.

· The Bush tax cuts for the wealthy will be extended eventually

VJ Arjan also added something he read on Louis Navellier’s market commentary:

· Historically, the greatest appreciation in the market comes from the 3^rd year of a Presidential term. The S&P has averaged 17.13% over the last hundred years, while the 1^st, 2^nd, and 4^th years have averaged between 4-5.5%.

· A weak U.S. dollar is leading to cheaper exports and a lowering trade deficit. The change from June to July went from $49.8B to $42.8B, versus an economic consensus of $48B.

· Earnings pre-announcement season anticipated to show another stunning round of earnings

Trading in the Futures, Currency and Options Market

Jack Gammon was explaining his approach to trading. He has been trading futures, currencies, and options since 2002 and here’s what he had to say.

His 3 tenets of trading are:

1. Chart reading, especially technical analysis

2. Volume analysis for options and futures

3. Surrounding oneself with successful traders so that good habits can be implemented and bad habits can be eliminated

Also, he informed us that trading options is much, much easier if one can learn to trade stocks first. And, also, for arbitrage techniques, only a computer will suffice as the windows of opportunity are so brief.

The Future of Terrorism

The department of Defense issued a statement conjointly with the major European governments about an enormous safety hazard from the uncovering of a potential mass-coordinated plot from Al-Queda.

Kevin Day was expressing the magnitude of the results that would ensue if these terrorists were able to pull off some major acts of terrorism in a few main cities in Europe (London, Paris, Berlin, Rome, Madrid, etc.) He went further and said that this event would be enough for the world to start taking sides.

Tommy Schultz felt that there would be two ways to handle the situation if it escalated to this extent:

1. Use covert intelligence operations to take out the main leaders of the organization

2. Declare an all-out war against the terrorists and start pulling weeds until they are completely gone. This would mean some enormous civilian causalities as a unwanted by-product of this engagement.

VJ Arjan felt that there would be one more alternative and that would be to promote open society and a capitalist economy in the Muslim countries that house this terrorism. People will rarely decide to join a terrorist movement if they’re making enough money to support themselves and their families well.

Home Loan Modifications

Andrew Whatley discussed some statistics and procedures about the loan modification programs offered by many of the larger banks, especially in places like California, Nevada, and Florida. A loan modification works in this fashion:

Suppose a homeowner has been unable to pay its payments for the last 2 years. The bank takes the payments on those 2 years and simply adds it to the end of the note as a balloon payment and then dramatically lowers the interest rate on the balance so that the borrower can make more manageable payments. The rate on this note steadily increases but at the end of this loan, there still remains this balloon payment, which the borrower will generally be unable to pay. Despite the short-term advantages of this program for Fannie Mae and Freddie Mac modifications, the default rate is hovering around 11%, while for portfolio, or bank-owned, loans the default rate is around 22%.

This leads Andrew to believe that home values will continue to decline and the clearly we are not out of the woods yet.

Newt Gingrich

Kevin Day who is himself a conservative, was expressing his disappointment in observing that the only viable candidate for the Republican party seems to be Newt Gingrich. Newt Gingrich happens also to cater to the more radical elements of the Republican party and tends to alienate the majority of moderate Republics.

Were there to be a showdown in the Presidential elections between Hilary and Newt, Hilary would be the winner by a landslide. He finds this totally disturbing as there seems to be very little cohesion or leadership in the Republican party.

Simulated Portfolio

Date	Security	Entry (Oct 08)	Current Price	Profit/Loss
October 1st, 2010	FXI (iShares FTSE/Xinhua China 25 Index	$25.16	$43.10	$1,794
October 1st, 2010	ILF(iShares S&P Latin America 40 Index)	$26.60	$51.05	$2,445
October 1st, 2010	EWZ(iShares MSCIBrazilIndex)	$37.69	$78.12	$4,034
October 1st, 2010	PBJ(PowerShares Dynamic Food & Beverage)	$13.27	$16.47	$320
October 1st, 2010	GUR (SPDR S&P Emerging Europe)	$29.74	$46.17	$1,643
October 1st, 2010	FCX (Freeport-McMoRan Copper & Gold Inc.)	$29.06	$89.13	$6,007
October 1st, 2010	WLT (Walter Industries – metallurgical coal)	$38.75	$82.10	$4,335
October 1st, 2010	VALE (Companhia Vale do Rio Doce – gold mining)	$13.12	$31.70	$1,858
October 1st, 2010	GVA (Granite Construction Inc.)	$35.67	$22.97	-$1,270
October 1st, 2010	MT (Arcelor-Mittal ADR)	$26.25	$33.49	$724

The next meeting will be on Sunday, November 7^th, 2010. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com