Meeting Minutes

We had a wonderful meeting today at The Olive Garden!  We had a total of 4 attendees: (from left to right) VJ Arjan, Kevin Day, and another who chooses to remain anonymous.  Ry Zamora also joined us later on as well.

Eurozone Drama

We started off the meeting by remarking how the Eurozone crisis as been sidelined of late and investor sentiment regarding the issue can be described as mild apathy.  This is probably due to a variety of reasons:

·         Ry mentioned how August is a vacation month (or Ghost-month, according to the investor world), not to mention that the world is still coming off of Olympic fever

·         It was mentioned that it is in Germany's best interest to preserve the Union and continue to benefit from various free trade agreements it has with the other countries in the Union, being a primarily export-driven economy

However, Kevin mentioned how Europe is still a grave concern and although it may not provide for a source of heart ache at the moment, its problems can only be stuffed under the rug for so long until a critical mass is reached. 

Even the ECB's recent promise to ultimately sign over a blank check for buying up sovereign debt of the PIIGS can and will only work if the sovereign nations put through severe austerity measures, which are a strict condition of the ECB's blank check policy.  Otherwise, the inevitable collapse is merely being delayed.

Ry mentioned that an important date to keep in mind regarding the Eurozone is September 12th, which serves for the general election for the Netherlands and also the deadline on policy regarding Euro member economic integration.

Obamacare

Kevin explained that if it was any doubt what the doctors in the state of Texas feel about Obamacare, they are decidedly against it.  He recently went to his doctor and it seemed that the subject of the oppressive measures put into place by Obamacare seemed to pop up no matter what the topic.

As for the rest of the country, it is evenly divided - contested and approved:

http://abcnews.go.com/blogs/politics/2012/06/americans-split-on-affordable-care-act-ruling-gallup-poll-finds/

U.S. "Big Brother" Foreign Policy

(Still of scene from Brave New World)

As a real-life example of the "might makes right" allegory first expounded in the legend of King Arthur, the reality of being the lone super-power in the world is quite a different story altogether, one which adds to the mix the human emotions of envy and jealously.

Kevin Day, who has lived in the United States since the 1950s explained how during the last half century, the United States has increasingly taken on the role of "big brother" in some cases, and "big bully" in other ones.

The result is that today due to President Bush's foreign policy foible of invading Iraq, we have a scenario in which a Great White Shark is in the midst of a multitude of hungry pirahnas. It is quite clear that much of the world would prefer that we first are able to take care of ourselves before being bold enough to take care of others. 

However, this is also much more easier said than done.  In a world where, Russia and China, want to involve the U.S. in a war that can distract their attention away from their "spheres of influence" and one in which America's enemies forge alliances, like the one recently forged between Iran and North Korea to share information on military technology, in the new world order, the United States must carefully pick and choose its battles.

VJ brought up that if history is any guide, any empire in the last began its decline when it ceased to recognize that it simply could not sustain its place in the world any longer.  Often times like in the Roman Empire, the abuse of credit led rapidly to its fall.  This is especially the case when the empire in question has to uphold its empire, while engaged in wars.  This was the fatal flaw of the British Empire, which by the end of World War I had instilled into place the foundation that would lead to the unwinding of its colonialist and mercantilist presence.

Bush Tax Cuts

Kevin mentioned that the feed from the grapevine suggests that the Bush tax cuts, which are due to expire at the end of this year, will be extended, but only in regards to the policy regarding the taxation of long-term capital gains tax, which will be kept at 15%.  The modification of the policy will demand a more hefty tax on corporate taxes.  It is still ultimately detrimental to the investor, but indirectly so.

The Negotiator President

We discussed in length the GOP convention and what effect it made upon the election, if any at all.

Kevin suggested that picking Paul Ryan as his VP was beneficial to Mr. Romney's ticket.  His emphasis on the reduction of the fiscal debt and also in rolling back entitlement programs, like Social Security and Medicaid, programs that will balloon to be bigger than any amount of  political rhetoric in the future, will curry favor to the fiscally conservative Independents, who will largely decide the election this year.  As is the case generally in every major election, each party will support their candidate in the election.

That being said, we also discussed Mr. Romney's greatest setback, which is the impression that voters have of him as being "out of touch", or at least "less in touch with the common man".  His ticket will largely depend on whether or not he is able to broaden his base to appeal to many more groups of people.  He is, however, becoming a much better speech maker and has gotten progressively better as the election has rolled on.

On the other hand, the Democratic conventions, appear to have nailed this piece.  VJ explained that although the Republicans will make it difficult for Mr. Obama to secure his second term, Mr. Obama sheer presidential charisma may lead him, albeit unfortunately, to a victory.

As voters take sides, the next great challenge ahead for both candidates are the 3 debates in October - 2 Presidential candidate debates, and 1 for the Vice-President candidates.

We all discussed what exactly Mr. Obama's shortcomings were as President and we all agreed that his greatest shortcoming was his inability to get both parties together to lead them to a compromise.  In this regard, President Clinton and President Reagan were able to do this effectively during their tenure.

However, the greatest negotiator of them all, may have been President Thomas Jefferson.  During his day, if there were ever a point of contention between the parties, or a highly bi-partisan attidude regarding an urgent issue, Mr. Jefferson would literally call the more extreme fringe elements into a room, close the doors and they would literally stay there together until there was a compromise agreed upon.  Not only would he close the doors, he would close the windows as well so that the stuffy environment would lead to a swift conclusion.  In one word, leadership. 

No doubt, today, we also have individuals on both sides that are taking on extreme views.  The rolling in of many Tea Party candidates during the last Congressional elections has not lead to forward progress but a virtual stagnation in policy making.  In fact, the majority of the public's disillusionment is not as much with the President than it is with Congress, the former of which currently has a 45-50% approval, while the latter has a 15-20% approval rating. 

VJ mentioned that at times like these, it would be helpful for our Congressional leaders to remember the words of Nelson Mandela, who advocating the attitude of having the "brain dominate the blood".  The logical conclusions of one's actions must take precedence over the emotional ones.

Greed

(Hetty Green, Witch of Wall Street)

"Greed is good." - Gordon Gekko, Wall Street

Recently an inherited Australian billionaire, Gina Rinehart, made the comment that poor people should "spend less time drinking, or smoking and socializing and more time working" and also advocated a $2-a-day wage for Australian mine workers.

For such a statement to come from someone who perhaps hasn't had to work in her lifetime, is a real tragedy.  It is possible that there is a great inner insecurity for such people who complain about the wages being given to workers while they themselves have been give so much.

It reminded VJ of Hetty Green, the "Witch of Wall Street" who during the Gilded Age of the late 1800's made a fortune of $100 million from American railroad bonds.  For your amusement, here were some curious quirks of hers:

·         Despite being a multi millionaire, she never turned on the heat or used hot water

·         She wore one black dress and undergarments that she changed only after they had been worn out

·         She did not wash her hands and ate pies that cost 15 cents

·         The rumor goes that she once spent a whole night looking for a stamp that cost 2 cents

Market Bias and Investments

The meeting minutes would not be complete without a mention of the economic environment yet to come.  

Here were some points and some investment opportunities that were brought up:

·         VJ noted that the Dow has been unable to break the 13,200 level 4 times since April.  It serves as a key resistance point at the moment.

·         The Federal Reserve hinted in its recent minutes that more easing would come "fairly soon" giving investors a harbinger of the anticipated QE3.

·         The housing market is showing signs of a recovery as median home prices were up 9.4% from 12 months ago.

·         There is an evident slowdown in the emerging markets.  China's Producer Manufacuring Index is now flat to down from over a year ago.  However, Kevin believes that the slowdown will be merely that and that a collapse will not ensue.

Potential Investments

·         GEJ - General Electric Preferred Shares

·         GJM - GMAC Long-term Notes (7.5% yield)

·         CII - BlackRock Enhanced Capital and Income (9.5% yield)

·         TLT - iShares 20+ Year Treasury Bond (short candidate)

·         SAIA - Saia Inc. (trucking company with healthy operating margin and low debt)

·         WBK - Westpac Banking (Austrailian banking firm with 6.5% dividend yield)

·         SGC - Superior Uniform Group (no debt, 4.5% yield)

·         NFLX - Netflix
·         GOOG - Google
·         V - Visa
·         MC - Mastercard
·         CRR - Carbo Ceramics

NASA Curiosity Mars Landing

It is amazing to see how the rocket scientists and astrophysicists at NASA can display the excitement of the avid football fan, but here it is and it is a real pleasure to watch.  Enjoy!

The next meeting will be on Sunday, October 7th, 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