We had a wonderful time in the outdoor air at La Madeleine discussing the market environment to come. I want to thank everyone for coming out and making this a very insightful meeting! We had 5 attendees: (from left to right) VJ Arjan, Kevin Day, Andrew Whatley, Jeff Harrington, and Johnny Kang.
The Floods in
We started the meeting discussing the trickling aid in
Here is how the aid shapes up compared to the
| | Total Aid |
| Hurricane Katrina | $1.4 Billion |
| | $3.6 Billion |
| | $740 Million |
Possibly, the lack of charitable giving to
Kevin Day Reads an Article
Kevin Day read to the group today an insightful article that detailed the case against a double-dip recession and that market forces can only move equity prices higher from here. Here are some bullet points from that article:
· For those who believe stock prices will go lower, who is left to sell? Those who would have sold, have already done so. In fact, the traders who sold short have continued to cover and take their profits.
· Although the economic data suggest overall sluggish growth, it certainly has not gotten much worse. Unemployment numbers continue to hang around 9 to 10 percent and housing values and sales are slow to recover. But it can only get so much worse than it already is, and Mr. Luskin believes that the irrational exuberance caused by the hyped fear of a global meltdown has led to equity prices being over sold.
· Historically, the current PE’s are at bargain ratios. Historically, the PEs for blue chip stocks has hovered between 15 and 20. This ratio is currently around 10.
· Corporate earnings have rebounded 35% from their lows, while the economy has rebounded 3%. The evidence in these numbers suggests that these earnings have not been adequately represented by the current stock prices.
Jeff Harrington Baffles the ex-president of the
Jeff Harrington, one of our Scarlet Kings, recently attended a Hodges Symposium on economic policy where ex-president of the Dallas FED, Bob McTeer was invited as a speaker.
During the Q&A, Jeff asked the Mr. McTeer about the “cash” being created by those who will be refinancing at lower interest rates and how that could fuel the economy with additional spending. In other words, if Mr. John Q has a mortgage with an 8% interest rate and refinances his mortgage at 4%, all of a sudden his mortgage payment has decreased. Although the net debt has not changed, the cost of the debt has changed.
He also recommended some suggestions on stimulating the economy as the economy appears to be in a Keynesian liquidity trap and asked some questions in regards to what the FED’s take on this would be. (In short, a Keynesian liquidity trap simply means that the government is trying to encourage businesses to borrower by creating an environment with low interest rates but businesses, out of fear of the future economic environment, do not borrower and instead prefer to work with their cash balances.) After, Jeff asked his question, the room fell silent, intent on Mr. McTeer’s response.
Incredibly, Mr. McTeer dismissed his inquiry and asked for the next question!
This is quite an accomplishment, I believe, for Jeff to go up against and baffle such a big Whig and maybe he’ll be in line to become one of the future FED presidents.
Hilary for President in 2012
The first campaign ad showcasing Hillary running for the presidency in 2012 has already started.
Granted that it has been paid for by William DeJean, who has run Hillary ads in the 2008 campaign as well, it signals the strong potential for Obama not to run for re-election in 2012. This campaign ad is currently running in
http://www.cbsnews.com/8301-503544_162-20015530-503544.html
Potential Market Plays
As we anticipate the economy to continue recovering, we feel that the following sectors will provide great opportunities:
· Financial stocks in emerging markets, particularly ones that have strong currencies (Royal Bank of
· Mining stocks in emerging markets, also with strong currencies (Vale, Rio Tinto, Arcelor-Mittal, etc.)
· Agricultural commodity ETFs (SGG – sugar)
· Emerging Markets ETFs (ILF -
Being Rich
“I love being rich!” – VJ Arjan
VJ Arjan spoke about the incredible feeling it is to be rich. He believes the definition of being rich has been misconstrued by the glitz and glamour shown on the television. However, the definition of being truly rich is both external and internal.
Externally, the definition encompasses the duration of time that one can live if one did not have any source of income. One could be making pots of money and still live the life of a pauper. In other words, to be truly wealthy from an external standpoint, it is necessary to live within one’s means and pay oneself first.
However, internally, this can be measured by how comfortable we are in our own skin and also how grateful we are of what we have. It is a state of mind that is without worry or stress and actually makes life much more enjoyable since the worry of money and the threat of physical insecurity (mortgage payment, bills, etc.) is eliminated.
What does it feel like to have reserves that last not only for the next 3 to 5 months, but for the next 3 to 5 years? It is an incredibly liberating feeling and we at the Scarlet Kings, I believe, have and will continue to attain this over time.
The Scarlet Kings via Meetup.com
There seems to be a more convenient way of bringing people together to our meetings and I will slowly start experimenting with this method. I thought I’d at least introduce my plans here.
I’ve subscribed to Meetup.com for the next 3 months to try it and see how it works out. So I will be sending invitations via Evites and Meetup.com for the next 3 months.
I am exploring this option as it opens up our meetings to a much wider audience and who knows, maybe we’ll find a few gems this way.
You can view the new Meetup link for the Scarlet Kings at: http://www.meetup.com/ScarletKings/
The next meeting will be on
