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

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