We had a wonderful meeting today in the outdoors at The Blue Mesa! We had a total of 7 attendees: (from left to right) Lamonte, Kevin Day, Elena Swindull, Tommy Schultz, Andrew Whatley (who came just after we took this picture) and VJ Arjan.
I’m am writing and publishing this material from Dubai as I have time, so it took a while to get this out to everyone. I have been taking some copious notes on the situation here, which to say the least, is very interesting, especially when getting a ground-level perspective from the people themselves, and I look forward to sharing this all with everyone at the next meeting.
Crisis in the Middle East
Undoubtedly, we spent the fair share of our time in discussing the situation in the Middle East. Just to recap, Tunisia led the way with a total coup of the current regime, which then led to similar protests in Yemen, Jordan, and, most importantly, Egypt.
We focused particularly on Egypt as it plays a key role in foreign policy. As it stands now, the leader of Egypt for the last 30 years, Hosni Mubarak, has been looked at by the West as the keeper of peace for the Israeli-Palestinian situation. In return, Egypt receives close to $2 billion in foreign aid from the United States.
But from the perspective of those who are on the ground, the majority of Egyptians have been living on around $2 per day. The country economically is in shambles. The coup in Tunisia represented the spark that lit an already tense situation amongst the people there. Now those people who have risen up want Mubarak out.
Kevin Day went into great detail on how the West has relied upon Egypt not only for its role as an ally to the West amongst some not so congenial Arab nations, but also to facilitate the use for the Suez Canal for keeping the cost of transportation of oil to a minimum. Mubarak leaving definitely creates the possibility of problems in the global economy; for instance, an increase in the price of oil would contribute to the entire cost of transportation for all hard assets and goods to go up.
There is one more threat that he has averted for the years he has been in power. Kevin believes that if Mubarak leaves and a more radicalized Arab power takes office, then the peace with Israel that has been so delicate could be broken at a moment’s notice and then the West would get involved in a conflict with the Mid-East as an ally of Israel.
This may also hinder, not enhance, the common Egyptian’s rights. Now it is also true that in the effort to focus on their own interests, the West has overlooked the human rights issues in Egypt. But the people may very well be on their way to greater political and economic freedoms.
We also commented on the incredible speed and power of this uprising. Egypt is certainly not as well connected as many other countries may be. In many homes, internet, cellphones and television are a luxury. But somehow, the entire country rose together, from Cairo to Alexandria, in a matter of 6 days.
We also saw how there could be a domino effect with other nations. Iran, Syria, and Lebanon could certainly be on this list. Jeff Harrington postulated that the CIA could be behind inciting the uprisings, but he also said that it would be hard to prove a motive for the United States to urge coups in these countries.
Market Selloff
No doubt the situation in Egypt dominated our conversation, and we talked little about the market.
That being said, we felt that the market is due for a healthy selloff. Kevin Day noted that the market has run up for 10 consecutive weeks in a row, and seldom do we go this long without a correction.
Jeff Harrington added that consumer confidence and GDP numbers over the last week have given investors reason to believe that we are slowly but surely crawling our way out of the economic crisis of 2008.
We’ll be watching many of our favorites, including commodity plays and emerging markets, to look for additional buying opportunities.
How To Trade
Lamonte has been day trading and swing trading stocks for a couple of years now and he asked everyone at the Scarlet Kings what their method of trading was.
Kevin Day talked about the how he evaluates the company through fundamentals using metrics like volume to determine price movement. His time horizon for his trading style is more near-term – he holds stocks for at least a week to a few months before exiting and taking profits.
Jeff Harrington uses a combination of fundamental and technical analysis in his trading style. He recently purchased Walter Energy (WLT) which produces metallurgical coal, which he believes will be in demand for many years due to its vital use in the production of steel (fundamental analysis). He did, however, wait to buy this on a pullback when it reached its 20-day moving average (technical analysis).
However, both Kevin and Jeff stated that each person will have his or her own investing / trading style and it is essential to know which style one is most comfortable with. For instance, Kevin’s style of investing makes sense to Kevin and makes money for him as it suits his temperament, but no matter how successful it has been for him, it may still not make money for another.
Nelson Mandela, who recently turned 92, was checked into the hospital last week for what was thought to be a routine physical examination. Kevin Day has relayed a few times in the past, how South Africa is a tinder box that would explode. Only Nelson Mandela has been able to hold the peace so far, but after he is gone, which may not be too far in the future, the country could be torn apart by those who wish to take his place.
VJ Arjan depicted how this may parallel what happened in India when they declared independence; how Gandhi tried to hold all of India together and could still not prevent Pakistan from seceding.
State of the Union
At the end of January, President Obama gave his yearly state of the union address. We felt that the President gave a balanced viewpoint and promoted a bipartisan agenda. Unlike the last State of the Union speech, with the requirement that each member of Congress was to sit next to a member of the opposing party, the cheers and jeers were more subdued this time.
Since the November elections he has been forced to realize that he must actively work across party lines. He focused on many issues that catered to the consensus like the reduction of federal debt and a push for clean energy. He also declared a drastic austerity measure that would freeze the federal spending on domestic issues for 5 years.
His emphasis on out-competing the world made a good deal of sense by touching on our lagging education system.
That being said, we felt that his speech was short on specifics. Inspiring hope is better when we can know exactly what to be hopeful about. Kevin Day pointed out that Representative Ryan’s counter speech from the GOP hit on this too, but Mr. Ryan’s speech also didn’t offer much in regards to specifics.
The next meeting will be on Sunday, March 6th, 2011. I will be out of the country for most of February so I figure we could at least have our meeting on the last Sunday of this month. My apologies to anyone this may inconvenience. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com
