We had an indicative and opportunistic meeting today at Chili’s! We had a total of 5 attendees: (from left to right) Kevin Day, Jeff Harrington, Andrew Whatley, Elena Swindull, and VJ Arjan (not sure what’s going on with the eyes :-) ).
2010 - A Year In Review
We started the year discussing what has occurred in the past year and how we have all profited enormously. Regular investment themes on the Scarlet Kings like commodities and emerging markets have surged, some making fresh highs in 2010.
Here were the top 5 performing markets by country (not surprisingly all of them are emerging markets):
1. Indonesia – 54.9%
2. Thailand – 54.3%
3. Chile – 47.9%
4. Colombia – 44.0%
5. Argentina – 41.3%
Kevin Day explained how small caps have done very well, in particular junior miners (i.e. GDXJ – Market Vectors Junior Gold Miners ETF). Of the precious metals silver’s gains far outpaced gold, and Kevin believes that this will continue in 2011 as well.
The Euro
Famous fund manager, Louis Navellier, recently posted an article on his blog stipulating that as the euro turned 15 years old on December 16th, will it survive to be 20?
Interestingly enough the top performing European economies were outside the Eurozone, with the exception of the very fiscally strong Germany, while the worst European economies were the PIIGS, with the exception of Norway.
Top 6 European economies: Turkey, Sweden, Poland, Germany*, Switzerland, and Denmark
Bottom 6 European economies: Greece, Ireland, Norway*, Spain, Portugal, and Italy
So this begs the question if the Euro constitutes any real benefit at all. In fact, Jeff Harrington explained how there is talk that the very strong Germany should indeed pull out of the Eurozone and go back to issuing Deutchmarks. This alone could collapse the house of cards. But according to Navallier, Germany may try to rescue this economic union out of a misplaced sense of duty:
“Europe has struggled for the last 65 years to bury their hatchets and form some kind of mutually-beneficial economic union. But unlike the United States, Europe is still a welter of sovereign states, with different languages and economies, joined loosely by their common coin, but with ancient rivalries beneath a thin veneer of courtly civility.”
VJ Arjan related that the economic differences within the Eurozone are exacerbated by the fact that not only each country, but each county within each country generally has a different tax code.
Kevin Day has even reverted to a previous inclination that this may be the year that we see the Euro on parity with the dollar.
The Greenback
Most likely, short of lighting one’s assets on fire, the U.S. dollar has taken a bloodbath not only against other major currencies, but also against hard assets, like ferrous and non-ferrous commodities.
But, Kevin Day believes that the coming year will fare well for the U.S. dollar although mostly against the major currencies. He still believes that commodities, including precious metals, will continue to appreciate.
The New Congress
We now have a less partisan Congress, with Republican John Boehner as speaker. He has previously publicly spoken about the need to reduce the national deficit and we hope that he is serious about this. These policies, if put in place, will obviously be positive for the U.S. dollar as austerity measures will curb government deficit spending and will also make the Fed stop its printing presses.
Kevin Day believes that the recent healthcare bill ratified by President Obama will be repealed and that there will begin some severe austerity measures.
What To Expect in 2011
Kevin Day’s famous “Market Nose” tells him that the economy should be on track toward recovery until at least the end of Q1 this year. After that he cannot see.
Here are some other highlights:
· The shoe for commercial real estate is still one that must drop and he thinks that this possible may hit during the latter part of this year.
· Commodities, particularly precious metals, are still going to be investment favourites.
· In particular, Kevin feels that mid-cap stocks will perform very well; one way to get exposure to this is to pick up the Russell 2000 ETF (IWM – iShares Russell 2000).
· Emerging markets can be picked up by taking a position in the Vanguard Emerging Markets ETF (VWO). The great thing about Vanguard no-load funds, for the most part, is their very low administrative fee structure. He also likes the China (CHN) and Taiwan (TWN) funds.
· Some blue chips that are trading at favourable prices include: Ford (F), General Mills (GIS), and Citigroup (C).
· Something Jeff Harrington called during the middle of last year, it may be prudent to start nibbling on some natural gas as it looks poised for a break to the upside. Ways one can take advantage of this play: Kinder Morgan Energy Partners LP (KMP), Chesapeake Energy (CHK), Devon Energy (DVN).
Kevin Day’s “Market Nose”
Elena Swindull asked a Kevin Day how he decides to pick the stock he picks and here’s what Kevin had to say:
Speculative Plays
Kevin Day has offered these two speculative plays for the coming year. For those who have invested in Santa Fe Gold Corporation and for all those who have followed Kevin’s plays in the past know that when this man speaks, it is prudent to listen.
Razor Resources Inc. (RZOR) - small cap miner engaged in acquisition of mineral rights and exploration of mineral property in Honduras. In March 2010, the company completed the acquisition of 99% of Compania Minera Cerros Del Sur, S.A., which owns gold mining concessions and producing gold mines covering 200 hectares in Honduras. 
AEterna Zentaris Inc. (AEZS) -
Simulated Portfolio
Date Security Entry (Oct 08) Current Price Profit/Loss January 2nd, 2011 FXI (iShares FTSE/Xinhua China25 Index $25.16 $43.97 $1,881 January 2nd, 2011 ILF(iShares S&P Latin America 40 Index) $26.60 $53.49 $2,689 January 2nd, 2011 EWZ(iShares MSCIBrazilIndex) $37.69 $76.78 $3,909 January 2nd, 2011 PBJ(PowerShares Dynamic Food & Beverage) $13.27 $18.09 $482 January 2nd, 2011 GUR (SPDR S&P Emerging Europe) $29.74 $50.57 $2,083 January 2nd, 2011 FCX (Freeport-McMoRan Copper & Gold Inc.) $29.06 $116.08 $8,702 January 2nd, 2011 WLT (Walter Industries – metallurgical coal) $38.75 $135.49 $9,674 January 2nd, 2011 VALE (Companhia Vale do Rio Doce – gold mining) $13.12 $35.13 $2,201 January 2nd, 2011 GVA (Granite Construction Inc.) $35.67 $26.24 -$943 January 2nd, 2011 MT (Arcelor-Mittal ADR) $26.25 $35.89 $964
*Positions entered in December 2008
The next meeting will be on Sunday, January 30th, 2011. I will be out of the country for most of February so I figure we could at least have our meeting on the last Sunday of this month. My sincerest apologies to anyone this may inconvenience. For those who have not attended a meeting, but would like to attend, please email your wish to VJ Arjan at scarletkings@gmail.com
As the year 2010 comes to a close and we sit and count our profits for this year like the last, we all remarked how we have grown not only financially, but personally as well.
On another note, the
Jeff Harrington posed that one potential way creating this type of austerity measure would be to increase the gasoline tax from 15 cents per barrel to 30 cents. Given that crude oil prices are continuing their upward trend, this 15 cents could very rapidly add to our government’s coffers.
Julian Assange, former Australian and current head of the WikiLeaks organization was the topic of debate. By releasing hundreds of thousands of documents revealing the inner workings of the
We did not think that one would be justified in engaging in a completely unrestricted right to free speech. Kevin Day said, for instance, it is within one’s right to yell the word “Fire!” in a crowded theater but is morally reprehensible at best and even criminal at worst to do so. This wouldn’t be the case, however, if one expresses his or her right to speak freely and it does not affect anyone else directly. It is only when one exercises one’s right to free speech and this affects the livelihood of other individuals that there would be a problem.
Part of his motivation, we believe, may have been to reveal the politicking that occurs behind the scenes to the public at large. We found out, for instance, that
The January Effect and the Start of a New Decade
The January Effect may have already started. Mutual funds are anxious to ride the market up to higher heights so as to make their year-to-date performances look better and the retail sales since Black Friday look very promising.
It is also interesting to note that many financial crises culminate at the end of a decade (70's - surging commodity prices; 80's - savings and loan; 90's - dot-com boom; 2000's - residential real estate bubble). If history has been any guide, then perhaps there will be a decade of prosperity ahead of us at least until the end of that decade. :-)
Economic Rebuilding
Kevin Day, who was a founding member and used to be chair of
· 40% of the homes are in foreclosure
· Unemployment is at 15%
· The main thoroughfare in
Kevin explained that the situation in
But despite these incredible challenges, the forum discussed possible future ventures that would be heavily invested in alternative energy technologies like geo-thermal, solar, and wind energies.
The Market
Kevin Day made some predictions as always about the market for the coming months. He believes that in the short-term, there may be profit-taking for those who are trying to take advantage of the current long-term capital gains tax as there is a threat that this could be increased to an ordinary income tax in the future. But the overall market trend should still be upwards until the end of Q1.
Crude oil, precious metals, agricultural commodities and emerging markets should all continue to rise. Retailers and regional banks should also continue to rise as they have been battered badly during the recession.
Unemployment, however, will continue to take time to decrease. In fact, during last month’s FOMC meeting, Mr. Bernanke stated that it could take up to 6 years for unemployment to decline to normal levels.
The Scarlet Kings Muse
In truth, the above only comprised a small portion of the meeting. Jeff Harrington kicked it off by setting the tone for a very philosophical meeting. I will try to elicit some of the poignant questions that arose during that conversation, which may serve all of us well to remember.
Of the many things mental characteristics that we have learned to emulate is would be how successful and wealthy individuals think. As Zig Ziglar says, the reason why some people succeed and some fail is because of the thing between your ears, your mind.
But to repeat positive self-talk alone will not assure success in itself.
If one tries to remain upbeat although one is basically a negative person, the person will not change and fundamentally will remain a negative person. To draw an analogy, the positive thoughts could be similar to a banana peel. No matter how hard the peel tries to change the banana itself, it cannot do so.
What is required, we discussed, was an internal change of how one views oneself. (*Herein, we believe lies the secret of all achievement and success.) There is a perennial saying that has been repeated throughout many cultures all over the world over the centuries which can sum this up: “Know Thyself.” The reason why some of the most powerful movers and shakers of the world would have little use for positive thoughts is because their very self serves as the rock and foundation for their being. This requires complete honesty and an ability to accept oneself as he or she is.
Ask yourself, when I look at myself in the mirror, do I like and admire the person that I see? This is how the inner self is changed.
Asking this question can also mean that I see myself as a human being that has flaws and the ability to make mistakes: that I am not perfect, but that this is okay. Nobody is perfect and to make mistakes is a part of life and our very being. To embrace this aspect of ourselves then is a very important part of “Know Thyself.”
Those who have held themselves accountable to the lens of perfection could be uncomfortable about who they are and may be afraid to make mistakes. It may be prudent to remember a quote from Thomas Watson Jr. the president of IBM who made this company into the industrial titan it is today:
“It’s quite simple, really. Double your rate of failure. You’re thinking of failure as the enemy of success, but it isn’t at all.”
The next meeting will be on Sunday, January 3rd, 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
We had a wonderful meeting today in the outdoors at The Saffron House! We had a total of 7 attendees: (from left to right) Tommy Schultz, Andrew Whatley, Earl Landry, VJ Arjan, and Kevin Day. We also had Jeff Harrington and Jack Gammon join us briefly later on.
Congratulations to Andrew Whatley!
After successfully passing the Bar examination on his second attempt, our own Scarlet King, Andrew Whatley, is now a full-blown lawyer! The Bar is an incredibly difficult test consisting of 5 three-hour sessions and we are all thrilled that he passed it.
Also, due to his generosity and dramatic increase in his income, we would like everyone who reads our blog to know that he will be paying for all meals for each attendee from here on out!
(Just kidding of course, but congratulations nonetheless.)
Mid-term elections
We discussed the landslide winnings for the Republican party which led to their majority in the House and a significant blow to the Democrats in the Senate. It will be interesting to see what happens in our political environment now given that President Obama will be forced to work with the Republicans as opposed to sidelining them.
Kevin Day, however, predicts that given that President Obama has a conviction to push his Socialist agenda, there will be very little that can or will be accomplished as bipartisanship will be even more divisive.
News around the world
There were several key events that took place:
At least, however, he is able to initiate some policies to comply with Mrs. Merkel’s “tax and axe” measures.
In a surprise move, both
Robo-foreclosures
Earl Landry and Andrew Whatley were discussing the future of the so-called robo-foreclosures. Due to the record number of foreclosures throughout the country, there have been several thousands of loans that may have been wrongfully foreclosed upon due to shoddy processes and mishandled paperwork. Andrew continued to explain that due to the volume, it is extremely difficult for managers to review each and every case and this has led to some expedited processing.
They do not see this turning into an avalanche of lawsuits, however, and feel that there are periodically newer and better processes being released to deal with these situations. Although for the moment, there will be issues, these are slowly but surely being resolved.
Precious Metals, Emerging Markets, and Agriculture
Kevin Day has been calling these three sectors for months now and finally all three have been exploding particularly silver for precious metals and sugar, corn, and wheat for agriculture. Kevin also feels confident that the market run should continue at least until the first quarter of next year. Below are some charts of these plays:
SGG - Sugar Futures ETF
HL - Silver Miner
VWO - Emerging Markets ETF
Potential Market Plays
Kevin Day was discussing some potential market plays that would be prudent to take advantage of currently:
’30-40-30’
Kevin Day suggests entering a position on a given stock by breaking the amount into 3 segments which he calls ’30-40-30’. One enters 30% of the total amount one wants to invest at one price, then 40%, and then the remaining 30%. In this way, one tries not to pick a bottom or top and instead gets an average.
The Future of
As someone who has an inside view of the Indian culture and psyche, VJ Arjan explained what he sees are some of the potential opportunities and also some overwhelming stumbling blocks in its future.
The Indian people are some of the smartest, hardest working individuals on the planet. They are well-educated in the subjects of mathematics and science and have the ability to be workaholics.
However, the challenges far undermine the potential. Although they are a competitive people, the competition reaches the levels of pettiness such that even among siblings and friends there is competition to be better, to receive higher marks, or to make more money, etc. There are literally mass student suicides right around examination time and particularly in cities as families expect the best from their children and also to be able to represent the highest social status to others in their clique.
Unfortunately, there is still, even in the cities, evidence of caste discrimination. There is also the feeling of great pride and a belief in the superiority of the Indian race.
All these factors, which are rooted deeply within the Indian culture will become major challenges that will confront
The next meeting will be on
