Coming Out of the Woods
Kevin started off by remarking how, it seems, that we are finally coming out of the woods.
We are finally seeing a somewhat meaningful dip in unemployment. This dip could be related to seasonal holiday hiring, but he sees the trend going in a better direction in the near future.
VJ Arjan and Jeff Harrington added that the President’s new Home Affordability Refinance Program (HARP) will enable hundreds of thousands of homeowners to refinance to bottom-barrel rates fueling the need for increased consumption and getting the American economy on the road back to a restoration of confidence.
In addition, the Federal Reserves pledge to keep interest rates at current levels until July 2013 enables the lending markets open up the taps again.
That being said, these all point to a generally tepid rise in the U.S. markets in the short-term. Jeff and Kevin re-iterated that over the long-term, there will be a reckoning for the sins of the Federal Reserve’s printing presses and there is no way that the United States can avoid severe austerity measures, at some point.
Emerging Markets
Kevin pointed out that the emerging markets look shaky in the near-term.
Nearly every emerging market is down at least 15% over the past year.
The talk of a bubble in China is being reflected in the way the Chinese ETFs have performed in the last year. He is, therefore, cautious in the near term.
Obviously, for a long-term investor, these prices represent tremendous opportunities to build positions at relatively favorable prices. For such investment opportunities, it is favorable to have the press and media beat down such sectors as long as possible.
Basic Materials and Precious Metals
This sector was among one of the worst-performing. After a tremendous rise in commodities prices for 2 years, this year was certainly one for a correction, particularly for nonferrous metals.
That being said, Kevin noted that, especially for precious metals, he can only see them going higher.
Where else would one park one’s assets? That is the question. Outside of cash, precious metals seems like a relatively safe bet.
Euroland Crisis
The problem is not only the staggering amounts of debt, but also their high-risk nature. It is very conceivable that one or more of these nations could default on their sovereign debt load.
We also collectively re-iterated that should the Eurozone crumble, it will be a lesson to posterity in the folly of seeking to achieve an economic union before a political one.
The truth of the matter is that especially the Western European countries have a deep-seated animosity that seeps back several centuries in time. Not to mention the grudge that many Eurozone countries hold toward Germany and the Nazi occupation in World War II. To suggest that this would be a road without any bumps is idealistic.
Elena Swindull, who grew up in Slovakia explained that, at least in the Eastern European countries, there is no real animosity and not surprisingly, these countries have relatively conservative debt levels in place.
There seems only to be three viable options:
1. To have the distressed nations to default on their debts and leave the Eurozone in an orderly fashion.
2. The stronger countries bail out the weaker one.
3. The stronger countries cut their losses and leave the weaker Union.
The Fall of Herman Cain (and the Rise of Newt Gingrich)
Herman Cain is an inspiration, especially to minorities who would look at the color of their skin as an excuse to spread the message of oppression. This may be especially applicable in the African-American community, where the median family’s net worth is roughly 6% of other families. Somewhere, there is a new generation of leaders in this community that has become inspired by his example as well as that of the current President.
That being said, he must have known about the skeletons in his closet before entering the race and it must have been sheer gusto on his part to keep on and run for becoming President. It was highly unlikely that anyone could have simply skipped over an affair that had allegedly lasted 13-years.
His fall has led to the rapid rise of Newt Gingrich, who is the leading candidate in the Iowa straw poll. He is no knight either. The troubles in his personal life have frequently been hit upon, and so has his inconsistencies regarding several key political issues. He does, however, have 30 years of experience in the White House and that could go a long way for him.
Stock Updates
Aeterna Zentaris (AEZS) – According to Nick Souders, a cancer researcher at the Harvard Medical School for the Dana Farber Cancer Institute, we are still awaiting the results of the successful trials for a cancer drug. The key, he said, is to wait until next February for the trials results. If the results come out early next year, then the trials were a success and there could be tremendous upside potential for the share price. However, if we hear anything before that time, then the trials were not successful.
Santa Fe Gold Corporation (SFEG) – There was an analyst report issued recently that valued the company’s share price at $5.22. Kevin was kind enough to send over a link to the report: http://www.grassrootsrd.com/grassrootsrd/Reports/Santa_Fe_Gold_11_13_2011.pdf
2011: A Year In Review
With the year coming to an end, it may be prudent to go back and recount some of the most significant events of the past year relating to the core interests of the Scarlet Kings.
The Death of Osama Bin Laden
Shortly after Bin Laden’s death, the number two in command, Anwar al-Awlaki was killed in a target drone attack in Yemen.
Japanese Tsunami and Nuclear Disaster Aversion
It also gave grave fears to the nuclear power industry as one of the power plants had been badly damaged and was on the threat of exploding. Fortunately, this has, by recent reports, for the moment been contained.
Occupy Wall Street
It can be argued that the people at these rallies are just a bunch of frustrated individuals who are looking for a venue to express their anger. However, if this movement continues, it could very well take on the vigor of a new kind of Populism that has not been seen in quite some time.
Of course, it will need to stand the test of time and we need to see if the momentum continues or subsides.
Egyptian Revolution
Perhaps the most important event of this year, the total impact of this event may not be fully comprehended currently, but we believe that we are certainly witnessing history here. Finally, a younger, more educated populace decided to rebel against authoritarian leaders who ruled with a staff of iron for several decades. Moreover, it was a relatively peaceful revolution that was organized by, for perhaps the first time in history, social media networks like Facebook and YouTube. Imagine, a country where not even all citizens own a TV or let alone a computer with internet, can rise into full revolt in a span of 7 to 10 days. This is what happened in Egypt.
The people’s victory here went on to similar movements in Syria, Yemen, and Libya and went on to even inspire the Occupy Wall Street movement that has sprung up recently.
Best performing sectors:
| Pipelines – Natural Gas | +45% |
| Tobacco Manufacturers and Distribution | +23% |
| Retail – Clothing and Accessories | +17% |
| Consumer Finance | +17% |
(From BigCharts.com)
Worst performing sectors:
| Precious Metals – Gold, Silver, Platinum | -39% |
| Airlines | -35% |
| Nonferrous Metals – Basic Materials | -29% |
| Mortgage Finance | -27% |
(From BigCharts.com)
With the close of 2011, we wish you all a very happy holiday season and wealth, health, and prosperity in the coming year.
Ladies and gentlemen, to the future.
The next meeting will be on Sunday, January 8th, 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.
Also I find that there are many domestic and international readers who are following our blog posts not only in the United States but all over the world including Europe, Latin America, and Asia. If you wish to be added to our email list, please email at scarletkings@gmail.com.
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