Meeting Minutes

We had a lively meeting at Chili’s! We had a total of 7 attendees: (from left to right) Earl Landry, Kevin Day, Jeff Harrington, Elena Swindull, VJ Arjan, and there were 2 others who out of respect for their privacy wish remain anonymous.

Dismal Employment Numbers

During the past week, the Department of Labor released the official employment numbers, which were very disappointing and give cause for worry to investors about the economic slump we are still crawling out of. The report stated 18,000 jobs created; the expectation was in the vicinity of 175,000.

As the days tick by to Election 2012, these employment numbers will become increasingly more and more important for the current President, who is the front-runner Democrat seeking re-election.

The Market Euphoria and the 4^th of July Rally

During the past two weeks, the Dow Jones Index rose 800 points. The question is ‘What are investors really that excited about to cause such a rally?’ Kevin Day reminded us that the market is also a human animal that experiences frenzies and psychological euphoria. The long-term recovery will take a long time; today’s large institutional investors, for the most part, are still scared and not euphoric about the market. The rally has also coincided with the famous Independence Day rally, which is a psychological metric as well.

As for the future direction of the marketplace, there is much uncertainty. Will the U.S. economy climb on past this crisis shortly or will it remain in a bear market for the next decade? Kevin believes that the U.S. economy has shown much resiliency in past crises and that the American people will ultimately decide to put through austerity measures that will lead to a balanced budget and a stable economy.

From a chartist’s perspective, the market looks like it is heading for a correction for at least the near-term. But at the end of the day, fundamentals will always lead the economy over the long-term. It is on these that we’ll continue to focus: unemployment rate, housing, interest rates, etc.

The GOP Contenders

Mitt Romney seems like he is the front-runner candidate for the GOP. A former governor and successful businessman, he is someone who can seem Presidential. His Mormonism may or may not be a deciding factor for him, we will have to wait and see how it plays out.

He has been receiving competition from Michele Bachmann, who seems like a more moderate Sarah Palin, but who nonetheless panders to the extreme wings of the Republican party, the Tea Party Movement. Her radical views may ostracize her appeal, while Romney seems to maintain a good balance.

Kevin Day explained his view that it could certainly get more interesting if Rick Perry threw his hat in the ring. He is also a successful governor, generally liked by his state, and has served this role for more than a decade. The key stumbling block for him is if he can in a limited amount of time get his name out there quickly and win the votes from other states. He probably has another 60 days before it’s too late.

The Economic New World Order

We had a spirited conversation about the new world economy, which is, instead of being single nation-states who are mass producer of goods and services, is becoming individual economic hubs of specialty.

For instance, previously state-centrist countries like China, who isolated itself from the world economy until 1973, had produced everything from automobiles to infrastructure for the state. Now, the automobiles are being imported from Daimler and the GM and infrastructure from General Electric are being imported while China focuses on non-durable manufactured goods like clothes, textiles, etc.

The Germans also provide for the world cloud computing and enterprise management software solution through SAP. The Japanese provide consumer electronics for the entire world. The United States underwrites global military security and healthcare research. Each country is no longer trying to be jack of all trades, but a master of just a few.

Man vs. Country

VJ Arjan discussed a terrible paradigm the world is shifting to based on the book ‘Latitudes and Attitudes’ by Thomas Friedman. It talks about the first war in history that a country has gone to war over, not another country or even a nation-state, but an angry individual empowered with the capacity for great destruction. In the late 1990s, the late Osama Bin Laden’s al-Qaeda destroyed two American embassies in Africa. One week later, the President and the CIA authorized 75 cruise missile weapon strikes toward the alleged hideout of Bin Laden in Afghanistan. Each missile cost $1 million dollars apiece. How much did the U.S. spend in that strike alone in one week against one individual: you can do the math.

These Pancho Villa-like renegades may be our future. It is not the country who declares war upon us, but the madman who decides to strap a bomb to his chest and enters a restaurant that we will have to protect ourselves against.

Undoubtedly, the greatest and most effective remedy to combat terrorism is to encourage prosperity and participation in the global economy. It is not a coincidence that many of these jihadis are unemployed and disaffected economically. More times than not, people will put down their guns and grenades if they’re making money and living comfortably.

What The West Does Not Hear

Too often, in the West, in the conflict in Jerusalem, Israel is portrayed as the good guy and the Palestinians as the bad guy. This is not the case. One of our members explained how Israel, although on the surface, can be compromising, they have abused their military superiority to the detriment of the Palestinians multiple times as well. Take a look at changing borders of Israel:

Does this mean the Israeli’s are the only ones to blame. No, the Palestinians too often have taken on the victim role and served up impossible negotiations to the Israelis. Frankly, they do not have much to bargain with, as their military is, fortunately or unfortunately, nowhere near as powerful as Israel’s.

EQ vs. IQ

We had a discussion about the determining factors of the person who attains success: is it EQ (Emotional Quotient) or IQ (Intelligence Quotient). Well, it certainly can be both, but the conclusion we came to is that EQ is more important than IQ. There are plenty of people with high IQs that because they do not know how to manage their emotions or the relationships they have with others end up not seizing the success they could have.

On the other hand, there are plenty of examples of people with high EQ who end up creating empires, who also had little IQ. The founders of Pilgrims Pride Chicken and the Weir Brothers Construction Company are two examples. These people are centi-millionaires and billionaires and yet they have a difficult time speaking or spelling correctly.

It turns out that people with high IQ end up working for people with high EQ. The ability to deal with yourself emotionally and to deal with people effectively is by far the greatest asset a person can have.

As legendary titan of industry John D. Rockefeller Sr. said,

“The ability to deal with people is as purchasable a commodity as sugar or coffee and I will pay more for that ability than for any other under the sun.”

The world is increasingly becoming less adept at social skills. Earl Landry was relaying an experience of a recent wedding he went to where no one on his table took the basic courtesy of introducing himself or herself to the others. He thinks that many people have holed themselves up into a bubble of technology and that limits and numbs their social skills.

New Simulated Portfolio

If you recall, we have a simulated portfolio that was created in November 2008 and was tracked for the Scarlet Kings every quarter. It may be time to re-examine if there are any changes to be made, additions or otherwise. We can discuss them at the next meeting.

Here is the current simulated portfolio:

July 2011

Security	Entry (Oct 08)	Current Price	Profit/Loss
FXI (iShares FTSE/Xinhua China25 Index	$25.16	$41.20	$1,604
ILF(iShares S&P Latin America 40 Index)	$26.60	$49.62	$2,302
EWZ(iShares MSCIBrazilIndex)	$37.69	$69.54	$3,185
PBJ(PowerShares Dynamic Food & Beverage)	$13.27	$20.13	$686
GUR (SPDR S&P Emerging Europe)	$29.74	$50.67	$2,093
FCX (Freeport-McMoRan Copper & Gold Inc.)	$14.53	$54.25	$5,038
WLT (Walter Industries – metallurgical coal)	$38.75	$109.63	$7,088
VALE (Companhia Vale do Rio Doce – gold mining)	$13.12	$32.23	$1,909
GVA (Granite Construction Inc.)	$35.67	$24.72	-$1,095
MT (Arcelor-Mittal ADR)	$26.25	$32.11	$586

The next meeting will be on Sunday, August 7^th, 2011. For those who have not attended a meeting, but would like to attend, please email your wish scarletkings@gmail.com

Next Meeting of the Scarlet Kings

Greetings to All,

The next meeting of the Scarlet Kings will be held on

Sunday, July 10th, 2011 at 12:30PM.

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

Please join us for a fruitful and lucrative discussion!

Very Sincerely,

VJ

Meeting Minutes

We had an insightful meeting at On The Border! We had a total of 5 attendees: (from left to right) Jeff Harrington, Elena Swindull, Kevin Day, VJ Arjan, and Ryan Zamora (who joined us later on).

China - "Cloud Society" To Superpower

A large part of our meeting was focused on the next superpower of the world, China.

Kevin Day, who was there when Nixon opened up China, recounts how far China has come. Back in the 70s, Kevin was in China representing his firm. At this time, China was a rural backwater or “cloud society” totally isolated from the rest of the world since 1949.

Kevin recounts his conversations with the people there who had lived in a bubble their entire lives. While the Americans and Europeans were hoping for another car and another color television for themselves, the Chinese were hoping for another bicycle and another radio. They were literally living a generation behind the West.

Mao was smart enough to understand that China could not remained closed off forever and initiated through Nixon to open its doors to the United States.

Around the time that Mao, affectionately known by the Chinese as the Great Helmsman, died, and with the leadership of Deng Xioaping, China was well on its way to becoming a global player in the marketplace.

Today, the technology gap has in some cases tipped in China’s favor in comparison to the rest of the world. Kevin recalls how some of the best trains and infrastructure in the world, some of which technologically is light-years ahead of the current standard in the United States, is currently in China.

There is hardly a comparison, infrastructure-wise between India and China. It is said that India has the worst road system in the world, next to Haiti. Their trains are a marvel of human nature and ingenuity in terms of human beings usage of space, crammed to the hilt. It is a wonder that there are not more accidental deaths in these precarious situations. The Chinese rail system in particular, which took $250 billion to build, is a technological marvel and deserves considerable praise. It is light-years ahead of the current subway system in place in New York City.

What the Chinese government is doing right now may be compared to what the United States did to the Europeans in the early part of the last century.

The United States made it to the top by providing lend-lease agreements for its armaments to the Europeans who were in the thick of World War I and II. The European nations ended up owing huge debts to the United States.

How the tables have turned. Today, the United States owes a staggering amount to the Chinese, who have continued buying our debt for two decades now.

The future, nonetheless, looks very bright for the next greatest nation that will at least share the world stage with the United States for the next few decades.

Bernard Baruch, a great speculator during the 1920s, once said that speculation comes from the Latin word speculare, which means to observe. It is a lesson for us speculators to observe, that one must never, ever rest on one’s laurels.

For those who do not heed this advice, fame and fortune cometh and leaveth like the fickle wind.

The Future of Al-Queda

VJ Arjan posed the question regarding the terrorist threat after the death of Osama Bin Laden. Will it be like the Nazi party in the 1940s, which crumbled to bits after its leader, Adolf Hitler, killed himself or will it be like the Hydra that has 3 more heads for the one that is cut down?

We discussed this at length. The consensus we arrived at was that this organization will plague us for quite some time to come. It is so grassroots and so radicalized that many disenfranchised and frustrated people can find solace in this way of life. According to what the CIA has revealed, some of these recruits have been from the United States.

Currently, the Al-Queda organization is being led by Ayman al-Zawahiri, an Egyptian Islamic theologian and has already sworn death to the Americans and the other Western powers. Cyber-terrorism may become more prevalent in the future.

Kevin Day, however, believes that some of the greatest acts of terrorism may come from ordinary citizens. Due to the ease of technological accessibility, ordinary citizens who want to voice their frustration can cause catastrophic harm. Some examples include, Timothy McVeigh, the plotter of the Oklahoma City bombings.

People Throw Themselves On Their Swords

The latest scuttlebutt amongst the highest rungs of Congress is that should Obama need help in his re-election campaign, Hilary will resign her post as Secretary of State and become Obama’s running mate. If this were to happen, it would be the first time a President has changed Vice-Presidents, but it could cast a severe blow to the GOP, if it can even galvanize an effort to put up a good fight.

Be A Buyer In July

Jeff Harrington and Elena Swindull were discussing the possibility of QE3 (quantitative easing) and the effects this might have on the economy. The state of the economy is in shambles today. Although there is stability, unemployment is staggeringly high and home prices have made new lows. It is only logical that the FED continue its quantitative easing policy, although Bernanke has given us hints to the contrary in his meetings.

Kevin Day is convinced that it is time to start nibbling on the financials again and whetting our beaks a little in the emerging markets.

It is time to start buying in July.

Some suggestions include:

Financials

o Wells Fargo (WFC)

o Vanguard REIT ETF (VNQ)

o Bank of America (BAC)

o iShares S&P US Preferred Stock Index Fund (PFF)

o Aberdeen Asia-Pacific Income Fund (FAX)

o Goldman Sachs (GS)

o Morgan Stanley (MS)

o Citicorp (C)

Emerging Markets

o iShares FTSE/Xinhua China 25 Index (FXI)

o iShares MSCI Brazil Index (EWZ)

o Vanguard MSCI Emerging Markets (VWO)

o iShares S&P Latin America 40 Index (ILF)

Some Riskier Emerging Market Plays

o MSCI Indonesia Investable Market Index Fund (EIDO)

o Aberdeen Chile Fund (CH)

Rare Earth Oxide

Jeff Harrington discussed the future demand of rare earth oxides. 98% of this material is currently in China and these oxides are being used from uses are various as hybrid and electric vehicles, to wind power turbines, to lasers and hard disk drives. The company he suggested looking at is Molycorp (MCP), which has had a 40 return over the past year.

The next meeting will be on Sunday, July 3rd, 2011. For those who have not attended a meeting, but would like to attend or if you simply want to be put on the mailing list for these blog updates, please email your wish to VJ Arjan at scarletkings@gmail.com

Next Meeting of the Scarlet Kings

Greetings to all,

The next meeting of the Scarlet Kings will be held on

Sunday, June 5th, 2011 at 12:3OPM.

Location: Mi Taquito's Tex-Mex Restaurant

(3957 Belt Line Road, Addison, TX 75001)

Please join us for a thoughtful and lucrative discussion!

Very sincerely,

VJ

Meeting Minutes

We had a wonderful meeting Romano’s Macaroni Grill! We had a total of 6 attendees: (from left to right) VJ Arjan, Ryan Zamora, Andrew Whatley, Kevin Day, Jeff Harrington, and Greg Bartell.

Osama Bin Gotten

The very day we had our meeting, we had the wonderful news of the death of Osama Bin Laden. I would like to throw this issue into an open discussion and would appreciate any comments on how his death would affect the future of the Al-Qaida organization and also the future of terrorism now that the “Gambino” of the terrorists is no more. I would also like to get some opinion on how this news would affect President Barack Obama’s presidency and re-election chances. So please make some comments.

Buffett-Sokol Issue

Berkshire-Hathaway investors had some questions regarding David Sokol’s $10 million purchase of Lubrizol shares before pitching its buyout to Buffett. Some sources have said that Mr. Buffett knew of the existence of this purchase beforehand and did nothing about it. Right now, he is playing the “I wasn’t informed enough about the situation” scenario.

Mr. Sokol, one of the prospective successors to Mr. Buffett, would have been asked to go and seeing the writing on the wall, he resigned before this was done.

Kevin Day believes that although there will be short-term backlash for Buffett’s lack of vigilance regarding this issue, in the long-term this issue will be swept aside.Every corporation will have problems crop up, and, for the most part, life goes on for each one of them.

The Banking Sector

VJ Arjan noted how the earnings for the major banks have been very disappointing.Most notably, Bank of America’s earnings stood a full 10 cents per share short of analyst estimates.

Jeff Harrington noted that the banks that have been able to post profits have done so by “trimming the fat” and reverting loan loss provisions from an accounting standpoint (Every bank keeps aside a portion of cash in an account for loan loss provisions that is considered an expense. When they reduce this amount, it is accounted as an addition to cash flow.)

He further noted that the growth prospects for the large banks seems limited as well at least for the short-term. He still affirms that the long-term future for banks has tremendous upside potential.

The Silver Bubble?

Kevin Day noted how the price of silver has shot up 50% year-to-date. In his view, the continuation of this rate of appreciation creates a bubble like quality in terms of price action.

He believes that if there is a correction coming, it would be a drop in silver that would be the catalyst for this chain of events. (Literally the day after our meeting, the price of silver fell by 13%).

There would, naturally, also be a correction in gold and other precious metals as well.

Buffett’s Next Buyout Target

Jeff Harrington explained how Buffett has a boatload of cash on his books and, by U.S. tax law, he has to either do one of two things with that cash: pay out a dividend or pay taxes. Jeff further explained that he doesn’t want to pay taxes and will seek to reinvest this cash buy looking for another company to buy.

He feels that this could possibly be in the energy field, particularly natural gas as this commodity becomes a more and more viable alternative to coal.

Deficit Reduction Program

Congress has come up a few plans on reducing the federal deficit. Jeff Harrington noted that there only one problem: reducing the deficit will not actually lower the national debts. The deficit reduction plans only address the decreasing the shortage between income and expenses every year, but this still means that our national debt will continue to increase year after year.

Kevin Day still believes that the time will eventually come when the American people will say “enough is enough” and take on some severe austerity measure to balance our national debts. He believes that the resolve of the people is tremendous and that they will come through at the end.

Dividend Plays

Greg Bartell discussed some great dividend plays and we’ve listed them along with some other similar ones below:

· Cellcom Israel Ltd. (CEL) – 12% yield. Provider of cellular communications services in Israel since 1994.

· Partner Communications Company Ltd. (PTNR) – 11.4% yield. Provider of cellular communications services in Israel since 2001.

· Blackrock Enhanced Capital and Income Fund (CII) - 12.6%.

Other Investment Plays

Carbo Ceramics (CRR)

Jeff Harrington brought up this play a couple of years ago when this stock was trading at $30 a share. We were all surprised to see this stock reach $160. Jeff still believes there is more potential for upside as a long-term play as this goes hand in hand with his belief in natural gas becoming an emerging energy form.

Encore Wire Corporation (WIRE)

Another recommendation by Jeff. Encore is a manufacturer of copper electrical building wire and cable.

The next meeting will be on Sunday, June 5^th, 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.

Next Meeting Of The Scarlet Kings

Greetings to all,

The next meeting of the Scarlet Kings will be held on

Sunday, May 1st, 2011 at 12:3OPM.

Location: Romano's Macaroni Grill

(4535 Belt Line Road, Addison, TX 75001)

Please join us for a thoughtful and lucrative discussion!

Very sincerely,

VJ

Meeting Minutes

We had a wonderful meeting out in the open spring air at La Madeleine’s! We had a total of 5 attendees: (from left to right) VJ Arjan, Greg Bartell, Tommy Schultz, Elena Swindull, and Kevin Day.

Congratulations To Elena Swindull!

We want to extend our heartiest and merriest congratulations to Elena. By the time the next meeting occurs, Elena will have had her second child, a baby boy, and we, at the Scarlet Kings, are thrilled for her!

Mitt Romney

Kevin Day noted that within the Republican ranks, Mitt Romney seems like the most possibly electable candidate. This he asserted keeping in mind that the bar that is set rather low across the board for the other contenders, none of whom would seem presidential enough for the voters.

On the other end, Obama’s re-run seems assured; he has announced it recently and will start creating the foundation for his billion dollar campaign. It seems unlikely, at least at this moment, that any other serious Democratic contenders may rise. Kevin’s guess that Hillary might seize her opportunity to head up against Obama seems like it might not occur. But that may still be too early to say.

Tesla Motors (TSLA)

Greg Bartell was explaining his conviction behind what Tesla motors intends to do: they intend to be the Ford Motor Company of the 21^st century. They have been making acquisitions of large auto manufacturing warehouses, some of which were owned by the Big Three setting the stage for massive production schedules. He also noted how the management team’s credentials are impeccable. No doubt the founder, Elon Musk, has a vision that far supersedes his Tesla Roadster.

Japanese Earthquake

Kevin Day noted how there is not much control from the authorities in the handling of the Japanese earthquake; the Japanese people, it seems, are handling the problem themselves for the most part. He also noted how the Japanese may be downplaying the issue regarding nuclear radiation. This could be perhaps in the quintessential Japanese mannerism to save face or avoid shame.

VJ Arjan recalled how this may end up much like Toyota’s recent brake problem; the management team waited until the problem had snowballed so largely until it was too big to be covered up, after which the problem would be addressed.

That being said, it is remarkable and inspiring how the Japanese people have maintained a sense of calm and equipoise amidst this terrible tragedy. People are suffering, but each person is doing his or her share to rebuild and keep the environment peaceful. There are hardly any murder or theft reports, so much so that when the grocery stores have run out of food, they simply leave and wait until more supplies arrive. They are not rioting, where most people around the globe most certainly would. Kevin believes that Japan has a large elderly population, upwards of 20%, and that may be helping them keep this equipoise.

Libya and Gaddafi

Although it seems that civil war could occur in Libya, Kevin Day believes that Gaddafi is looking for his way out by means of exile, much like Napoleon agreed to when the British offered him to be exiled on the island of Saint Helena. However, he would not be formally imprisoned. We have also received such hints from Gaddafi’s son who spoke to journalists about these options.

That being said, VJ Arjan reminded everyone how Gaddafi has successfully remained in power for 4 decades. He took power when President Obama was only 9 years old. He certainly has experience on his side, but is this revolt from the people powerful enough to overthrow him; is different from the last ones?

The Emotions Of The Market

We all remarked how incredible the swings in the market are and how emotionally they trade when a news event occurs. Take, for example, the Japanese earthquake. The moment it occurred, nuclear stocks across the board took a nose dive, some falling by 20% or more. At the same time, solar stocks all jumped up 10%.

Kevin Day noted that these are absurd reasons for stock values to remain in the long-term. It may certainly be valuable for trader, but investors would find these movements irritating.

Tommy Schultz explained how today’s information age and in the public’s participation in the stock market may be causing the swings to be so vehement as the media nor the public were in the market in the past.

Elena Swindull believes that these movements can be blessings to investors who are looking to snap up equities at cheaper prices.

Kevin Day’s Market Nose: Tread With Caution

Kevin Day was consulted for his forecast for the near future of the market. He explained that it wasn’t time to head for the exits, but it may be prudent to start taking profitable positions off the table. It was also time to convert riskier plays and move toward more conservative ones. He feels that the market is struggling to make newer highs and the steam will eventually run out with a prospective downtrend in the works. Also there is still the specter of commercial real estate which looms ominously still but has not been realized as yet.

Many of the staple plays like Ford and General Electric are struggling to maintain their current levels and he feels that this is telling of the general market environment and a harbinger for the near-term future.

Some more conservative plays Kevin personally has been moving his riskier positions to include:

• Europe, Australasia, and the Far East Fund (EFA)
• Nasdaq 100 Fund (QQQ)
• S&P 500 Index Fund (SPY)
• U.S. Preferred Stock Index (PFF: 7.7% Yield)

Freeport-McMoran (FCX)

VJ Arjan asked Kevin Day what the future of Freeport-McMoran looked like as he was contemplating taking some of his profits off the table. Kevin expressed how he was surprised that stock hasn’t run higher after the split, perhaps past 60 to 70 at least. His recommendation was that it was time to book half our position and let the other half ride.

The next meeting will be on Sunday, May 1^st, 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