Monday, December 31, 2012

Next Meeting of the Scarlet Kings



Greetings to All,

The next meeting of the Scarlet Kings will be held on
Sunday, January 6th, 2013 at 12:30PM.

Location: The Olive Garden
(4240 Belt Line Road, Addison, TX)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Saturday, December 8, 2012

Meeting Minutes


We had a wonderful meeting today at BJ's! 

We had a total of 5 attendees: (from left to right) Trey Jackson, Ry Zamora, VJ Arjan, Kevin Day and we had Elena Swindull join us later on.


The Evolution of Investment Banks and the repealing of Glass-Steagall



We started the meeting talking about the evolution of the investment banking industry from its inception in the 1960s till today.  VJ noted that in his researches on the industry, in the 70s there was only one investment banking institution on Wall Street that was a corporation, all others were partnerships.  It is no surprise that the investment banking business was considered trite and routine early on because the advantage of a partnership is that the partners funds are also tied up with the clients and so the stakes are more involved.  In fact, Kevin mentioned that during his career beginning in the brokering industry, many of the prominent Jewish firms on Montgomery Street in San Francisco were actually run by rabbis.

With the repeal of Glass-Steagall, however, commercial banking institutions could also become investment banks as well.  The directors of a corporation often have very little of their own money at stake and so the risks that could be taken with the clients' funds were higher precisely due to the limited downside for those running the corporation.  The result, which we witnessed four years ago, are not surprising therefore.

Today, many of the bell-weather investment banks that existed have either gone bankrupt or have been absorbed by commercial banking institutions.  Bear Stearns is now part of JP Morgan Chase, Merrill-Lynch is now part of Bank of America, and although most of Lehman Brothers went bankrupt, a small division was absorbed by Barclays Bank in the UK.  The only remaining large investment banking firms are Morgan Stanley and Goldman Sachs.  It has also been argued that the crisis may have been mitigated due to the commercial banks ability to absorb troubled investment banks, however, the counter has been argued with equal vehemence.


Fiscal Cliff and the Historical Tipping Point in the US





Here is what we can expect to happen starting January 1st, 2013 (provided that we all do not perish on the 21st of December, according to the Mayan calendar):

- In order to reduce the deficit by half, it is fairly certain that taxes will have to go up.  Kevin has argued that the Bush Tax cuts are expected to be extended by another year, but it remains to be seen and confirmed given the recent indications from Speaker Boehner regarding the tough negotiations with the President.

- If the mortgage interest deduction is tapped, it is fairly certain that a blow to home prices will ensue as this is value now taken away from the owner of the asset (in this case, real estate).  Home builders (KB homes, DR Horton, Beazer homes) and improvement stores (Home Depot, Lowes) are also likely to take a hit.

- There are slated to be cuts in defense spending, so companies that have exclusive contracts with the US government, like Raytheon and Lockheed Martin, will take a hit.  Kevin stated that due to the uncertainty of what will be cut and of what magnitude, he had to collect his profits on an position in Lockheed Martin and he mentioned that he most certainly was not the only one doing this.




All this talk about the "cliff" we are approaching, led Kevin to reminisce about the America whose shores he 
came to in the 1950s and how the pillars of this great nation have been weakened over time.  He remarked that the tipping point of this country in his eyes, was the Vietnam war as it was not only a very costly war, financially and geo-politically, but it was really the first war that the US had waged which did not garner support from home.  He mentioned how he remembers the weeks on end of continuous protest.  VJ added interestingly enough towards the end of that war, President Nixon took the US off the gold standard and the purchasing power of the dollar has, in time, steadily declined.

Kevin also mentioned that it is convenient to say that the problems we are facing happened overnight, but that would not be true and that the country has been in a steady decline in his eyes for several decades now.


Accounting Scandals



Our discussion revolved around the recent accounting allegation made by HP against Autonomy corp, a company HP acquired, which claims it lied about its finances before being acquired.

VJ recounted one of the most "creative" accounting methods used by Arthur-Anderson in the Enron scandal.  This is all detailed in a great documentary called Enron: The Smartest Guys in the Room (a clip of the CEO is provided below).

Enron for many years, was able to fool analysts from even very prestigious investment houses for over a decade, before the house of cards collapsed.  The principal method they used was to build a shell corporation that would account for all the losses and by also accounting for all prospective revenue for any project and reporting them as revenue for today.  Interestingly enough, the analysts were totally confident and collectively bought into the hubris that Enron was reporting correctly and there was hardly a tremor or break in the surface until 90 days before it was declared bankrupt.  VJ recalled that in an conference call a couple months before declaring bankruptcy, an analyst from a small firm asked the CEO, Jeffrey Skilling, what the small shell company on their books referred to, upon which, the now-convicted felon, replied dismissively, "That's a stupid question, what a dumbass!  Next question."

Kevin recalled an Italian firm he used to be on the board of while working at ITT, one of the largest insurance brokers in Italy and one of its largest clients was the Vatican, which insured its Vatican Art Treasures through this particular company.  Every year, the board would have a party to which two monseigneur would come and they would personally receive envelopes with a sizable "gratuity" of $70,000 each.  Kevin then inquired on how this vast "gratuity" was accounted for on the books and one of the directors replied, under the category of "unaccountable expenses".


Steve Jobs - the Zen Buddhist and Peak Performer 



(Steve Jobs in his apartment in the 1980s)

VJ brought up some of the studies he has been doing on the success of Apple products and also of Steve Jobs, a person who will most likely go down as clearly one of the great pioneers in the Information Age.  The interesting thing about Apple products is that although technologically, Apple products do not have the maximum capacity, their user ease-of-access and the way in which technology is used to make life easier and more accessible for its users are surely huge factors in what makes these products so desirable.

Steve Jobs grew up in California, around the Bay Area.  He was in San Francisco, the poster city of the flower power movement.  He studied many philosophies at Reed College as a liberal arts major, among them Zen Buddhism, which ended up having a lifelong lasting impact upon him.  He came onto the philosophy that "less is more" and that "simple is better".  He was also influenced by the Zen aesthetics.  Take for example, a Zen Garden:  


Like the iPhone and iPad, both utilize space as a vital part of its aesthetics.  It is simple and at the same time a beautiful concept.

In fact, many peak performers, from athletes to captains of industry, often find that the most productive place to be in mentally is when the mind is totally empty or having "inner spaciousness", when it is functioning in the simplest way.  Many athletes, in particular, have stated that the key to peak performance is to remain in a totally relaxed state. 


Elena and Ry - Conflict Breeds Innovation

Elena discussed with us how she is watching a National Geographic documentary called Mysteries of Mankind which discusses the origin of Man and the evolution thereof.  Among many of the startling realizations she has come to while watching this series is that one of the greatest catalysts for innovation has come from warfare.  

In fact, she stated that from her perspective it seems that conflict, in general, breeds innovation. 
Ry mentioned that some of the greatest technological innovations have come from the wars after the Industrial Revolution.  World War II, for instance, spawned the creation of pressurized cabins, radio navigation, Penicillin, radar, and, of course, nuclear power and weaponry.


A Brief History of India

After hearing the shocking revelation that the country of India is, in fact, only 65 years old, VJ gave a brief history of India, discussing all the elements that he has studied about the county dating back to its origins.  It ended up being a fascinating story.

At the very beginning, around 6000 BC, the Indus Valley civilizations of Harrapa and Mohenjo Daro had cities up to 20,000 people.  These two cities are often regarded by archeologists and the birthplace of civilization. 

The fact of the matter is that the country of India has not been a united block until recently.  They remained fragmented and rather isolated, until the thunderbolt in the form of Alexander the Great, who VJ regards as the greatest military general of all time, came charging in from the Northern part of India, near the modern Hindu-Kush Valley. 



(Alexander the Great)

Alexander wanted to conquer all of India, and probably would have, had his own army decided that enough was enough and they wanted to turn around and go home back to Greece, which is pretty much what ended up happening.

During 300-100 BC, the Indian subcontinent was ruled by the Mauryas, which pretty much remain set as the current boundaries of India and Pakistan country today.  There were other empires that came and went, but there was no concerted effort to unite the people as Shi Huang Di did for mainland China.  And this remained so for the next 1500 years. 



(Babur, the first Mughal conquerer, note how the similar the words "Mongol" and "Mughal" are)

The Mughals, who were descendants of the Mongols (aka Genghis Khan), ruled from the early 1500s until the British arrived in the 1800s.  And truly it took the British to rule India to unite it.  VJ argued that modern India may not have existed today had the British not come.  Because of the mercantilist treatment of India by the British, Mahatma Gandhi was able to unite the Indian people in a quest for freedom.

(Mahatma Gandhi)

In 1947, India attained independence from Great Britain.  That makes this county 65 years old.  However, as soon as they declared independence, there were internal conflicts amongst the Hindu and Muslim people that led to the split of India into West Pakistan and East Pakistan (now Bangladesh).

(Map of British India)

It is for this reason, the fragmented history and therefore lack of willingness to unite towards a single cause, that VJ has believed and continues to believe that India will have manifold problems in living up to the hype of being an emerging economy and world power.


Potential Market Plays - Emerging Markets

The following equities came up during our discussion as potential market plays:

The Emerging Markets - Kevin suggested that the emerging markets haven't looked this good in a long time and he is slowly nibbling on the ETFs that have been discussed in prior meetings.  These can include: FXI (China), EWZ (Brazil), EEM (Emerging Markets), GUR (East Europe), PIN (India), EWY (South Korea), TUR (Turkey).

Trinity Biotech (TRIB) - Ry mentioned this may be a good company to invest in giving their niche target market.

Comstock Mining (LODE) - A junior miner mentioned by Kevin as having good upside potential as the neighboring county itself has invested in the success of this company.


BlackRock Enhanced Capital and Income Fund (CII) - VJ mentioned that he has invested in this ETF which provides investors with the premium generated from writing covered calls.





With the close of 2012, I want to wish all of our readers a very happy holiday season and a happy new year to come in 2013.  May the year to come keep bringing more happiness, health, and wealth to our lives!


The next meeting will be on Sunday, January 6th, 2013. 

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

Sunday, November 25, 2012

Next Meeting of the Scarlet Kings



Greetings to All,

The next meeting of the Scarlet Kings will be held on
Sunday, December 2nd, 2012 at 12:30PM.

Location: BJ's Restaurant and Brewery
(4901 Belt Line Road, Addison, TX)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Friday, November 16, 2012

Meeting Minutes


We had a fantastic meeting today at Chili's! 

We had a total of 7 attendees: (from left to right) Ry Zamora, VJ Arjan, Jeff Harrington, Kevin Day and we had Elena Swindull, Erica and Owen Turnbull join us later on.

Going into the U.S. Elections and after-thoughts


Most of the conversation was dominated by the elections (keep in mind, the meeting occurred on the 4th, 2 days before the actual elections, of which we already know the result).

As you all know, after a much spirited campaign, President Obama won his bid for re-election.  At the time of our meeting, the consensus was that Romney would win the popular vote, while Obama would win the electoral college.  There were many indications prior to the election that led us to believe that this would be the case.

On the website InTrade, where ordinary folks can gamble on anything from stock prices to outcomes of current events, VJ mentioned the following odds:

For the general election: 65/34 Obama

For the swing states, Colorado: 53/47 Obama, Iowa: 69/31 Obama, Ohio: 65/35 Obama, New Hampshire: 68/34 Obama, Virginia: 53/46 Obama, Florida: 36/64 Romney.

Interestingly enough, the odds were totally on the money.  The election and the swing states all went to the forecasted candidates.

Also, worldwide the only country where the majority thought the election would not go to Obama, was Israel, perhaps because of Romney's vehement pro-Israel stance.

We debated the various tax policies of the candidates, which is a moot point now, but it was clear that Mr. Romney's plan was head-and-shoulders much more favourable to investors.  Now that his plan will not see the light of day, here's what the President tax plan is proposing:

- Unless the Bush tax cuts are extended at the end of the year (and Kevin Day believes that they should be extended for one more year), the long-term capital gains tax will go up from 15% to 20% for all those with household incomes greater than $250,000. 

- The estate tax and give taxes will also go to 45%, with an exemption on the first $3.5 million.

- Corporate taxes will go down from 35% to 28%.



(Source: Bloomberg.com)

The looming fiscal cliff is going to be a real problem for President Obama given the tax policies that he is urging, while still supporting various entitlement programs that were spelled out in the debates.  The goal for this budget is to cut in half the deficit, as a percentage of GDP.  Jeff mentioned if the proposed budget goes into effect, the consensus is that taxes and even interest rates can be expected to rise.


What happened Mitt?



The previous section was in relaying the thoughts we had about the upcoming election.  Now that Obama has won, we have to ask, how did Romney lose an election that was, according to many, his to win?  No President in the past has won a bid for re-election with the unemployment rate where it is today. 

First of all, in hindsight, it may not have been the greatest idea to send someone from Washington from Wall Street, while the memories of the Crash of 2008 are still so recent in the public's mind.

Also, Mitt touted a good game, but may have been less able to sell it to the public.  He was a better businessman than a politician.  Meanwhile, President Obama didn't really have any substance to his policies but was able to communicate his message with perhaps more clarity.

This election was a clear indication of the future direction the country is taking.  We had 20 senators added to Congress who were women, multiple states legalized gay marriage and Colorado and Washington legalized smoking marijuana for recreational purposes.

Could it be that the Baby Boomer generation (1960s-1970s) has taken over and the Silent generation (1940s-1950s) was laid to rest?

Add to this that the demographics of the voter population are changing.  African-Americans comprised 13% of voters, as opposed to 11% in 2008.  Hispanics and Latinos comprised 11%, not 9% as in 2008.  It is clear also that the youth overwhelmingly voted for Obama, by a margin of 65% to 35% for Romney; and these voters turned up an all time high.

Based on the figures, one thing is clear, and we have discussed it in prior meetings, the Republican party must broaden its base, otherwise it could be a tactical disadvantage.


Wisdom from a Great Trader


(Jesse Livermore)

Jesse Livermore, one of the very first great traders on Wall Street, put down this maxim in his book, Reminiscences of a Stock Operator, to look towards the price movement of the large companies and the rest of the market should follow suit.

If this advice follows today, then the market is in for some troubled times ahead.  Here are some interesting statistics:

- In the last month, Apple is down 15%, IBM is down 8%, the Nasdaq is down 5%.

- 63% of the companies on the S&P 500 have failed to meet analyst expectations.

- 90% of these companies have lowered their outlook for 4th quarter projections.  Jeff Harrington pointed out 
that Barrons ran an article recently pointing out that 2013 earnings could be revised downwards as well.

Under these market circumstances, the market can scarcely be expected to reach new highs in the near term.  

Jeff Harrington, however, believes that housing is making a legitimate comeback and that once this sector recovers the pall of a recession will cease to hang around, as it does today.

We also had a consensus on the role the Fed would play, or rather continue to play, which is to print money and throw them out of helicopters. The money printing may keep stock prices inflated, but only for so long; there must be an effect once the easing effect wears off. 

However, Kevin reminded us that there will always be special situations that the market will present us with and these trading opportunities will be plentiful with the volatility ahead.


Potential Market Plays

The following stocks came up during our meeting as potential market plays and investment opportunities:

Cooper Tires - tire manufacturer; 4% dividend yield


Safeway - food and drug retailer; 4% dividend yield

Silver Wheaton - silver producer that is also getting involved in the streaming business (providing capital to junior minors, in return for rights to the proceeds of the mine)

Banco Santandar - Spanish banking institution with a majority of its revenue coming from Central and Latin America; 12% dividend yield

SAIA - transporter of capital goods - Ry Zamora believes this may be a value play but also notes that he is still undergoing an analysis before he can confirm this


Intel - microchip manufacturer; Kevin believes this stock has been beat down and is looking attractive at these levels


Holcim - cement manufacturer; Ry pointed out that every year since 2008, global cement sales have actually increased year after year; he believes a good target price would be $11 per share rather than the intrinsic value of the stock itself

Metanor Resources - a speculative junior gold miner


Slovakia's Easter Tradition

On a totally different topic, in celebration of Easter, Elena was explaining how the Slovaks engage in a curious tradition.  Basically...well before your read any more, go ahead and see for yourself.


http://www.youtube.com/watch?v=jdJUydpbBOw

Elena explained how not only do men pour buckets of cold water on women of all ages, but they also get hit with a small stick throughout the day.  If this wasn't enough, some cities create a woman made out of hay, light it on fire, and then throw this into a nearby lake.

I don't think we have had as good a laugh about any issue for quite a while.


The next meeting will be on Sunday, December 2nd, 2012. 

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

Sunday, October 28, 2012

Next Meeting of the Scarlet Kings




Greetings to All,

The next meeting of the Scarlet Kings will be held on
Sunday, November 4th, 2012 at 12:30PM.

Location: Chili's
(4500 Belt Line Road, Addison, TX 75001)

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Monday, October 15, 2012

Meeting Minutes



We had a very interesting and varied meeting today at On The Border!  We had a total of 5 attendees: (from left to right) Ry Zamora, VJ Arjan, Elena Swindull, Kevin Day and Jeff Harrington.

Presidential Debates Matter

The very first topic we began chattering about was on how Romney's spectacular performance has possibly turned the probabilities in this election upside-down for the incumbent. 

Kevin Day mentioned how he felt that Romney was clearly on the offensive the entire time and for perhaps the first time, without the use of a handy teleprompter, the public was able to see the current President in a fatigued light.

Elena Swindull felt that the President felt nervous based on the body-language he was communicating, like a person who is unsure of himself.  She did not feel the radiance of confidence that usually shines forth from his personality.

We're not sure whether it had been a day full of difficult decisions, as often a day is being "leader of the free world" or perhaps it was as simple as he didn't eat a proper breakfast that morning, whatever the reason, it seemed that President Obama didn't want to be there.

The importance of a televised debate has really been in effect since the famous Kennedy-Nixon debate.  The non-verbal communication of the participants spoke volumes to the millions watching.  The small unconscious gestures, the grimaces, even the posture with which the participants carry themselves speaks volumes to the American people.


Above is a picture snapped at the most recent presidential debate.


Compare the defeated look of the current President to the Senator Obama who ran, 4 years ago.  What a remarkable difference in non-verbal communication is being portrayed in both instances!

Although, VJ Arjan was wary to point out whether or not Romney's debate performance was enough to clinch the election.  He feels that there are still a couple hurdles to go, but it is by no means in the bag for him.

This election battle has been by no means a very cordial one.  Jeff Harrington pointed out that when an analysis was conducted by FactCheck as to the accuracy of their assertions about their opponent, both were lying or exaggerating about the truth on several topics.


Cooking The Books

"Figures lie and liars figure." - Kevin Day

The Bureau of Labor Statistics (BLS) announced last week that the unemployment report surprisingly dropped from 8.2% to 7.8%.  A drop so drastic is certainly strange given the increasingly tepid economic environment we are currently seeing.

Kevin pointed out that the jobs numbers can very easily be "miscounted for" and that he suspects this is not the first time that such tactics have been used in increasingly politically-heightened scenarios.  VJ pointed out that apparently the difference of approximately 400,000 jobs came from a revision of jobs numbers stretching several months back.

No doubt, this gives President Obama some ammunition against Governor Romney who has painted the President as the primary blame for the economy's current situation.


The Case Against Government in the Private Sector

VJ, who is reading the marvelous, common-sense book entitled Economics in One Lesson by economist Henry Hazlitt read a chapter on the case that the author makes via the Austrian School of Economics (more colloquially known as the economics of common sense) on the reason why the government is an inefficient allocator of capital.

The reason why governments, historically, have generally trailed the private sector in how effectively they spend their money is that governments have a hard time saying no.  

As a public organization, the U.S. government in particular has taken on the father-figure role for millions of its citizens and its image as care-taker has only grown over time.  

Proof of this is that since the Great Depression and the subsequent New Deal enacted by President Roosevelt, several presidents had the chance to repeal the New Deal and label the New Deal as temporary relief programs that would end once the Depression came to an end, but none of them did. 

After Roosevelt, it can be argued that Truman was still busy cleaning up World War II and in jump-starting the Marshall Plan to help German and Japan to rebuilt their economies.  However, both Presidents Eisenhower and President Kennedy had the chance to cut back the entitlements programs, but they didn't.  Politically, it was not the feasible thing to do.  
It was a hard choice, but history has shown that politicians would just as much rather buy votes instead.

President Johnson solidified the entitlement culture along with his slogan of The Great Society by enacting the reforms known as Medicare and Medicaid.

VJ continued that the author argues that as private entities have accountability to its shareholders/equity-holders, more care is given to the allocation of capital whereas if there is a failed government policy, it can always print more money.

A perfect example of a failed government policy, VJ mentions, is the FHA loan.  The FHA loan did wonders when it was initially started.  However, over time the guidelines became more and more lax to the point where today, it is estimated that between 10-20% of FHA loans are delinquent each month.  Some research suggests that that number is closer to 30%. (http://www.bloomberg.com/news/2012-06-28/fha-underestimates-mortgage-delinquency-rates-study-says.html)


The Miracle of China

At a time when it has become fashionable in the investment community to bash the emerging markets, VJ thought he would share a story about the incredible effect that China is having on the global economy.

He had to buy a pair of eye glasses recently and remembered the lesson learned in spending $300 for a pair of Versace glasses that did not end up lasting very long at all.  So he did some shopping and found the following fashionable pair. 


How much do you think they cost?  Well, the shocking and amazing truth is that he paid a mere $25 from Zenni Optical to get prescription eye glasses complete with shatter-proof lenses and anti-reflective coating.  Curious about how in the world this company is able to do this, he called up their consumer help desk and he found that the glasses are manufactured in a factory in Shanghai and that the majority of the $25 actually goes to import fees imposed by the U.S. customs department.

Now consider how the range and diversity of the products that China makes and we have an integral piece of the manufacturing function of the global economy.  

Add to this fact that Chinese stocks today seem to be the cheapest since 1997 with an average price-earnings multiple of 11.4 for the Shanghai Composite.

No doubt, like all countries who have remarkable growth rates, there will be crisis.  But between the years 1800-1915, the United States had 15 financial crisis/panics and a Civil War and still averaged 3-4% annualized GDP growth rates.

Kevin has mentioned before that the major slowdown in China could only be momentary if it could be called a slowdown at all as the engine of growth is simply too robust and will continue to produce superior returns for decades to come.

Jeff, however, mentioned that the Chinese government may also be having its share of fiscal problems, the principal one being that their pension fund program for retirees of the State is financially in trouble and may in time snowball into a vicious political problem for the Communist Party, which the people are looking as the preserver of 6-8% GDP growth per annum.


Natural Gas and Other Potential Investments

We spent some time discussing the importance of the most viable fuel source next to crude oil, natural gas.  Strictly from a jobs perspective, Jeff argued, the growth in natural gas and its related industries is slated to create 3.5 million jobs in the next 10 years.

It is also becoming cheaper to drill and easier to transport, so it is a natural alternative to crude oil, as the world stops depending less and less on the Middle East.

Kevin and Jeff mentioned a few ways to play natural gas, some of which have been brought up before at previous meetings:

- First Trust ISE Revere Natural Gas (FCG)
- Targa Resources Partners L.P. (NGLS)

Some other investments that were brought up during the meeting are mentioned below:

- Rio Tinto Plc (RIO)
- Barrick Gold (ABX)
- Sandstorm Gold (SSL) - Kevin has been mentioning this stock for more than a year and it has nearly tripled in value since his first mention
- HOLCIM (HCMLY) - Ry believes a buy target price below $55 would be advisable



Conversation Amongst Two Gentlemen of Verona


"O heaven! were man But constant, he were perfect." - William Shakespeare

"Economics is envious of physics" - George Soros

After many of the attendees left, Ry and VJ sat discussing the reality of economics and the economy.

Alas, quoteth Ry, economics is not a science as Man is not constant.  (Enough of Shakespeare.)

All jokes aside, Ry discussed how the very nature of economics cannot be as constant as the law of gravity precisely because the participants in an economy are not ruled by a set of constants.  The participants are always in motion and so economics, according to Ry, cannot be categorized according to "growth" or "value" characteristics. 

Each situation is a function of three forces: price, expectations, margin of safety.  The fluctuations of economies is a result of the disparities between expectations and reality.  The further divorced from reality the expectations are the greater one's margin of safety should be.

Ry believes that the next "shoe to drop" may be student loans, a sector which is hardly getting any notice as the "shoe hasn't dropped yet".  Students are largely unable to find employment leading to delinquencies on student loan payments, not to mention that the return on investment of a college education and the cost of the tuition is in stark contrast to the economic benefit derived from having a degree.

Ry went on to say that the real economics solutions are, at the moment, politically impossible.  Hence, we have the caprices of Man enter into the equation.
He also believes that should hyper-inflation invade the U.S., it could most certainly begin once the world decides to give up the U.S. dollar as its reserve currency.  He believes that since at least 75% of the world's transactions are made in the U.S. dollar, the inflation is being shared throughout the world.  Once the dollar is not longer a the currency of choice, that inflation will come back home multiplied.



The next meeting will be on Sunday, November 4th, 2012. 

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