Investment advice for Ron Paul

Rocky never provides investment advice. But for once he’ll violate this  rule and offer some advice to Congressman Ron Paul.

Members of Congress must file financial disclosure forms which show all of their assets and investments. Rocky studied Rep. Paul’s portfolio from 2003 to the present.
http://www.legistorm.com/memberdisclosure/413/Rep_Ron_Paul_TX.html

Ron Paul’s portfolio violates every principle of sound money management. It is not prudent. It is not sensible. It is volatile. It is speculative. And it may give a window into Ron Paul’s perspective on the economy and free enterprise.

From 2003 to the present, Ron Paul’s stock portfolio owned only gold stocks. He owned some real estate. He had some cash. And he owned mutual funds that make money ONLY WHEN the stock market declines. He did not own any gold bullion. And more recently, he purchased more gold mining stocks and added to his bearish bets on the stock market using leveraged bearish funds.

In 2003, the value of his portfolio was between $860,000 and $2,300,00. (The disclosure form only provides a range of  values.)  In 2010, his portfolio grew to $2.4 million and $5.5 million.  (Gold stocks have declined between 15% and 30% in 2011, so his portfolio has declined commensurately. He will declare that loss next year.)

So, over an an 8-year period his portfolio has appreciated by about 12%/year. (And after this year’s losses for gold mining stocks, it will be a bit less than that.)

Not so bad, eh?

Nope!

If, instead of being such a wiseguy, he had instead just purchased gold bullion, his return would have been 55% better — returning an impressive 18.5% per year!  (It’s very strange that Ron Paul doesn’t own any bullion. And a skeptic might wonder whether he owns bullion, but failed to disclose it.)

[Disclosure: If one extrapolates the profile of his portfolio, one must conclude that he either nailed the bottom of the gold market, or he has really lousy long term performance. Remember that (even after this 10 year old rally) gold has appreciated at only about 5% for the past 30 years, while stocks have returned about 11%, and long bonds have returned high single digits. More troubling, however, is the notion that a  President of the United States would personally profit from a DECLINING stock market and a declining economy! Even Barack Obama's assets include some S&P Index Funds....]

How to prepare for financial armageddon? (Bring your own socks)

In light of the ongoing European financial crisis, Rocky is pleased to learn that the European Central Bank now provides visitors to their headquarters with a “hard hat” at no cost! However, they do ask visitors to  ”wear socks.”

No mention is made whether visitors must empty their pockets of spare change upon entering.

For a full text of the ECB’s dress code, see “What to wear” at:

http://www.ecb.int/ecb/visits/how/nep/html/index.en.html

 

 

 

 

 

 

 

 

 

 

David Hasselhoff, Baywatch & California finances

A recent article in the Orange County Register reminded Rocky of the glory days from  Baywatch , (the most-watched TV show of all time.)

The newspaper article explained that being a REAL lifeguard may be a better gig than being a TV lifeguard!

From the newspaper story: “According to a city report on lifeguard pay for the calendar year 2010, of the 14 full-time lifeguards, 13 collected more than $120,000 in total compensation; one lifeguard collected $98,160.65. More than half the lifeguards collected more than $150,000 for 2010 with the two highest-paid collecting $211,451 and $203,481 in total compensation respectively. Even excluding benefits like health care and pension, more than half the lifeguards receive a total salary, including overtime pay, exceeding $100,000. And they also receive an annual allowance of $400 for “Sun Protection.” Many work four days a week, 10 hours a day.

The article continues: “On face, the compensation packages for these guards are staggering. But take into consideration the retirement benefits being paid to currently retired lifeguards and lifeguards who will retire at these pay levels in the future and the problem is further compounded. Lifeguards are able to retire with 90 percent of their salary, after only 30 years of work at as early as the age of 50.”

The entire story can be found here:
http://orangepunch.ocregister.com/2011/05/10/lifeguarding-in-oc-is-totally-lucrative-some-make-over-200k/44783/

[Disclosure: Although Orange County generously provides a $400 "sun protection" allowance, Rocky notes that they do not yet provide a plastic surgery allowance. Pamela Anderson wannabes should take note...]

Calculator batteries & tax returns

IRS data show an epidemic of  “math errors” on personal income tax returns. 

During calendar year 2007  the IRS  counted “only” 3,885,505 mistakes. Yet in calendar year 2010, they counted 10,554,735.  That’s a shocking 272% increase in arithmetic mistakes. The full IRS data set can be found here:
http://www.irs.gov/taxstats/article/0,,id=207345,00.html

The IRS says math errors “include a variety of conditions such as computational errors, incorrectly transcribed values, and omitted entries identified during the processing of returns.”

Rocky wonders whether the epidemic of errors is due to the widely reported declining math skills of Americans. (“One-quarter of students at undergraduate and graduate levels believe that 1 divided by 5 = 5.”) Or perhaps it’s due to the increasing use of Turbotax (thanks to Treasury Secretary Geithner.)

[Disclosure: Rocky always changes his calculator batteries before starting his tax return, and highly recommends this practice for other law-abiding citizens. The IRS data did not disclose how many of the math mistakes identified were in favor of the government!]

Reduce the deficit: sell the White House

Zillow.Com is a nice website that “values” properties across the country. But sometimes Zillow gets a little too cheeky.

Their “zestimate”  for 1600 Pennsylvania Avenue is $251,617,000. For only a monthly mortgage of $1,036,276, you can enjoy 16 bedrooms and 35 baths in this 55,000 sq. foot mansion. (Built 1752).  See:
http://www.zillow.com/homes/1600-pennsylvania-avenue-washington_rb/

Zillow says the White House market value declined  25 % since the peak of the housing boom. Hence Rocky believes  it’s a great time for value-oriented condo-developers to swoop in. (“Great views, working fireplaces, bullet-proof windows, great yard for the kids and dogs….)

[Disclosure: Rocky continues to shop for a nice vacation home, but he hates DC's muggy summer weather.]

The pet insurance crisis

While the rest of the nation watched Sadie, a Scottish Terrier, win Best of Show at last night’s Westminster Kennel Club Dog Show, Rocky lamented the growing population of uninsured pets.

“How can such a wealthy nation turn its back on underprivileged pets?” asked Rocky, as he swerved his car to avoid an unwanted, discarded furry stuffed bear on the shoulder of his local highway. “It’s a national disgrace.”

The Times of London recently featured some harrowing tales of pet health insurance claims. The full story is here:
http://timesbusiness.typepad.com/money_weblog/2010/02/the-10-most-bizarre-pet-insurance-claims.html

These animals were the lucky ones because they live in a country with socialized medicine. The uninsured American pets never made the headlines — instead they seek medical care in dark alleys and makeshift clinics, staffed by unscrupulous get-rich-quick quacks. Or they just suffer in silence.

From the Times of London:

1. Alfie, a greedy chocolate Labrador, ate a wooden spoon while his owner was baking cakes. Having mixed the batter, the owner noticed that the mixing spoon was missing and saw that Alfie was showing signs of discomfort (and apparent guilt). He took the distressed mutt to the vet, who located the spoon in pieces in an x-ray and later operated to remove it.

2. A cat required an operation after swallowing a set of five rubber witch’s fingers. The costume fingers, which were part of a little girl’s Halloween get-up, had to be surgically removed.

3. A claim was received for medical treatment for a staffie called Busta who ate a rubber duck. The dog had been playing with its owners’ children when he swallowed the squeaky bath toy, which showed up clearly on the x-ray (pictured above).

4. In another case of a dog’s eyes being bigger than its stomach, a bulldog ate most of a wooden chair. When his owners came home, they found what was left of the chair in splinters, and the dog pining for a trip to the vet.

5. A Jack Russell terrier was playing with children in the garden and bit off more than he could chew when he swallowed a rubber chew toy. It was removed – and he bounced back.

6. An English springer spaniel got very unlucky when he impaled himself on the stick he was carrying. The dog was playing fetch in a local park, stumbled and dropped the stick, which caught his neck and punctured his throat. He was rushed into emergency surgery and made a complete recovery.

7. A hungry Labrador retriever was out with its owner on a fishing trip when he took the bait – and swallowed a fish hook.

8. A curious mongrel ate a whole pack of ibuprofen, causing a headache for his owner, who rushed him to the vet for treatment. The dog was put on a drip and kept under observation (reducing a potentially inflammatory situation).

9. A female Schnauzer was operated on after eating several sanitary pads.

10. A male Vallhund – a breed favoured by the Vikings – received treatment after being bitten on the lip by a rat.

Are you now, or have you ever been?

The other night at dinner, the discussion turned to inter-racial marriage. A relative at the table made a comment directed at Rocky’s daughter — and Rocky (perhaps impolitely) asked the guest to refrain from making such comments in his house, at his table, to his daughter. (Rocky respects everyone’s right to an opinion, however, there are also boundaries on indoctrination of one’s children, and the guest’s comment stepped over Rocky’s line.)

Rocky’s exact words were, “I find your comment extremely offensive. Can we please not discuss this.”

Needless to say, a heated argument unfolded, where the guest claimed that Rocky was not “listening” to the guest’s “entirely reasonable” exact words. Whereas, Rocky claimed that the guest was oblivious to the unspoken meaning of the words, and in any event it was disrespectful to lecture his daughter after Rocky expressed discomfort with the subject.

As the temperatures rose, the guest’s wife, suddenly blurted out, “Rocky, you know what you are? You’re a … [dramatic pause] … a DEMOCRAT!”

In the interests of full disclosure, Rocky is not now, nor has he ever been a member of the Democratic Party. Yet — that the word “Democrat” would be hurled as an insult towards Rocky speaks volumes about the current political climate, and even more about his guests’ respect for those who hold different opinions.

[Disclosure: Later that night, as Rocky tucked his daughter into bed, his daughter asked, "Daddy, are you really a Democrat?" Rocky's answer, "No, child. But I also know that neither you nor I need lectures about personal matters. If I want a lecture about the 'right' answers to life's questions, I can always visit the blogosphere."]

Obama’s blue screen of death

Rocky thought that reading President Obama’s entire State of the Union speech would be virtuous and useful. He was sadly wrong.

Rocky’s primary computer contracted a horrible virus yesterday from a website which re-printed the speech.

If this was a political conspiracy, then Google is behind it too — as Google directed Rocky to this insidious site. And, if Al Gore “invented” the internet, then President Obama’s speech just un-invented it (for Rocky.)

The site implanted the “Internet Security 2010″ malware program — which takes control of the computer … and eventually results in the “Blue Screen of Death.”

Several websites advertise repairs for the virus ($39.95), however after consulting with Computer Man, Rocky learned that the virus is essentially irreversible. And the software vendors are simply extorting money.

[Disclosure: Rocky's primary computer was rebuilt from scratch, and his backup systems worked fine. Thanks to Computer Man for his expert advice. No thanks to President Obama. Rocky wonders whether a Republican President's State of the Union might result in a "red" Screen of Death?]

Is gold expensive?

Over at Jeff Watson’s excellent blog, he’s been debating whether gold is going up or going down. Rocky asks a slightly different question, “At $1,000 per ounce,  is gold expensive?”

The following graph shows the behavior of gold and the behavior of the US Consumer Price Index going back to 1947. While examining this chart, it’s  important to remember that:

1. It was illegal for US citizens (anywhere in the world) to own gold from 1933 until 1974. 

2. In 1944, the “Bretton Woods” agreement fixed the price of gold at $35 per ounce.

3. In 1971, President Nixon unilaterally took the USA off a gold standard, and from then to the present the value of gold (and the US Dollar) were allowed to float freely.

So, the question remains, is gold expensive at $1000 per ounce?  As those annoying math textbooks like to say, “the answer is left as an exercise for the reader.”

The black line is the CPI Index. The yellow line is the price of gold. Both values were normalized to make the visual relationship easier to see.

Gold Price versus US CPI Index

A shocking new SEC / Madoff revelation

“Shocking,” is the adjective that comes to Rocky’s mind after perusing the SEC Inspector General’s report on the  botched handling of Bernie Madoff.

Rocky is shocked and appalled by the multiple grammar and syntax errors in the Inspector General’s report.  Rocky’s tennth-grade Inglish teacher, Mrs. Calabash wud have flunkked that authhor (along with Rocky too, of course.)

Rocky’s readers, with sharp red pencils at the ready, can find the SEC Inspector General’s report here:

http://sec.gov/spotlight/secpostmadoffreforms/oig-509-exec-summary.pdf

[Note: Any reader who correctly identifies five or more grammar errors should notify Rocky, and claim a unique prize of dubious monetary value.  And to Mrs. Calabash, "Good night, whereever you are!"]

Manhattan weather forecast for August 20, 2050

Rocky just checked this weekend’s weather forecast, and discovered a forecast for 41 years in the future.

Bloomberg news reports that “Climate Central” released their 2050 weather forecast for the Big Apple. Using “established scientific methods,” Climate Central predicts that in 2050, New York’s August will be substantially hotter than Atlanta’s current temperature.

For the Bloomberg story, click here:
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aV8f4NsP6hos

For the Climate Central website, click here:

http://www.climatecentral.org/other/august-heat/

Several years ago, Rocky’s broker called him with an offering of General Motors 40-year bonds, which would “resolve GM’s pension liabilities once-and-for-all.” Rocky’s response was a polite “no, thank you.” Rocky thinks beach-goers should treat Climate Central’s forecast with similar skepticism.

In particular, he notes that “established science” also predicts that the quarter-mile-wide Asteroid “Apophis” may collide with earth in 2036. If this happens, it will release 100,000 times more energy than the Hiroshima nuclear blast, and probably put the earth into another ice age. See:
http://www.guardian.co.uk/science/2005/dec/07/spaceexploration.research

[Disclosure: The General Motors 7.375% of May 2049 are in default.   On matters of weather, Rocky always keeps an umbrella, water bottle, and reflective thermal blanket in the trunk of his car. So he's fully hedged]

Florida “worst state” for spending stimulus

 

 

Washington bluntly labeled Florida as the “worst performing state”  because they’ve been the slowest to spend  highway stimulus money. See:
http://transportation.house.gov/News/PRArticle.aspx?NewsID=984

In Washington’s  Bizzaro  world, cautious spending  of taxpayer money is  bad. Very bad.

Rocky notes that Washington also appears unaware of the unusual highway conditions in Southern Florida: 

Rocky hears that highway crews are currently stuck in traffic on the Florida Turnpike. Local residents report that the highway crews are flashing high-beams and honking at a group of slow-moving white Taurus sedans moving 20MPH in the passing lane.  The Taurus drivers seem unaware that they should move over to the right lane, so the asphalt spreaders can pass.

Cutting off a leg to spite one’s wallet

During a recent  Town Hall Meeting, President Obama mistakenly said that surgeons get paid $50,000 for  leg amputations.

Alarmed that Obama’s error could drastically curtail the demand for leg amputations, the American College of Surgeons immediately issued a press release:

“President Obama got his facts completely wrong.  He stated that a surgeon gets paid $50,000 for a leg amputation when, in fact, Medicare pays a surgeon between $740 and $1,140 for a leg amputation.  This payment also includes the evaluation of the patient on the day of the operation plus patient follow-up care that is provided for 90 days after the operation.  Private insurers pay some variation of the Medicare reimbursement for this service.”   The full Surgical Press Release is here:
http://www.facs.org/news/obama081209.html

Although $1,000 for a leg amputation ”feels”  like a good price, Rocky wonders whether the Surgeons might consider offering an amputation volume discount?  Or, how about, “buy one, keep one free!” 

[Disclosure: Rocky admits that he is prone to hyperbole and exaggeration. He now realizes that the President  may be guilty of the same offense.  The primary difference is that the White House website lacks the proper disclaimer.  See:
http://onehonestman.wordpress.com/mea-culpa/
  ]

Chevy VOLT versus a horse & buggy

GM says that its new Chevy Volt gets 230 miles per gallon (using EPA test methodology).  Using the same methodology, Rocky’s wheelbarrow gets over 1,000,000 miles per gallon. 

Statistics don’t lie. Or do they?

Here’s the math (converting electricity to gasoline).

The Volt’s 350 pound battery pack generates 16 kwh or 57,776,000 Joules.

One gallon of gas = 1.3 x 10^8 Joules, which converts roughly to 0.444 gallons/hour (energy equivalent.)

So, if you are driving 50 miles per hour, the electricity consumed equates to about 22.2 miles per gallon of gasoline.

The Volt’s retail price will be about $40,000.  And average electricty prices are 15¢ per kwh. So the electricity bill will be about $2.40 for every hour of operation.

It’s reasonable to expect that the Volt’s cost will decline,  and its efficiency will improve over time.  It’s also reasonable to expect that if electric cars become popular, gasoline prices will decline and electricity prices will rise… creating a less favorable equilibrium.

Rocky concludes that absent an important breakthrough in battery technology (or massive government subsidy,) the Volt will be an expensive novelty — and not a commercial success. Even if it gets 253 miles per hour. See: Bugatti Veyron.

[Disclosure: Rocky drives a car that gets 32 mpg on the highway,  and his desk chair gets really good "gas" mileage too. Toot, toot.]

Denny’s salt lawsuit needs a “grain of salt”

A consumer activist just sued Denny’s Restaurant Corp [click here], saying the restaurant should disclose the “dangerously high” levels of sodium in its meals. The lawsuit seeks class action status (and money) for “all New Jersey residents who ate Denny’s meals … in the past six years.” Residents in other states are out of luck.

Rocky visited the Denny’s website and found ALL of the sodium content listed. Next, Rocky compared Denny’s with Panera Bread’s sodium content. (Panera is ranked as the #1 healthiest fast food restaurant at Health.Com)

Here are the stats for all entrees from both restaurant menus (as calculated by Rocky):
Denny’s: Average Sodium = 962 mg
Panera’s Average Sodium = 1439 mg
Surprisngly the “healthy,” upscale, and litigation-free Panera has more sodium than the humble Denny’s!!!

[Disclosure: Rocky has no position in DENN or PNRA. But if this silly lawsuit isn't dismissed, he'll examine the Denny's GrandSlamwich--Panera Panini Arbitrage. Perhaps cash-strapped municipalities should also consider spreading Panera leftovers on roads this winter...instead of rock salt?]

Professor Gates, Pretty Woman and a mattress

Harvard Professor Henry Gates’ arrest by the Cambridge Police Department reminds Rocky of the best technique for buying a new mattress.

In an interview with Bloomberg News regarding the Gates situation, Duke University Professor Kerry Haynie, who is black, said he consciously changes out of old clothes before shopping to minimize suspicion that he may be shoplifting.

When Rocky shops on Rodeo Drive (remember Miss Vivian in Pretty Woman), he doesn’t care whether store detectives falsely accuse him of shoplifting. (“Officer, that’s not a laptop under my sweater, I just need to lose a few pounds.”)

In fact, when shopping at a store where prices are negotiable (such as auto dealers and matress retailers), he consciously puts on OLD clothes to look less wealthy. He’s discovered firsthand that wearing a Casio watch, jeans and worn-out sneakers often results in a better price than when he dons a Rolex watch and Gucci loafers. He understands that the salesman may treat him with less respect, but Rocky is more interested in paying less than getting respect.

People (and the police) certainly respond to verbal and non-verbal cues. A challenge for the intelligent consumer is to use these sterotypes to one’s advantage. (By the way, Rocky loves his new car, which he bought well below dealer invoice.)

Universal health care and complex financial derivatives

The following flow-chart (which outlines the House Democrats’ Health Plan) reminds Rocky of Offering Memoranda that he read for CMO and CDO-squared structures in 2006 and 2007. This chart was provided by the Joint Economic Committee, Republican staff.

Rocky’s rule of thumb in investing: If he doesn’t understand it, he doesn’t invest in it. Rocky doesn’t understand this chart.

One can only hope that this “structure” has a happier-ending than the structured finance market.

For a larger image, click here:healthcare_PDF
For the “simple” financial derivatives chart, click [here.]

TARP & canned beverage consumption

Local charities in Moline, Illinois (population 43,000) want every man, woman and child to quickly drink 93 cans of soda.

After Rep. Barney Frank criticized Northern Trust (a TARP recipient) for sponsoring their annual charity golf tournament, Wells Fargo and US Bancorp slashed their charity contributions to the Moline-based John Deere Classic.

Local charities said that they were relying on this $200,000. To fill the budget gap, they instructed their volunteers to collect empty beverage cans and claim the 5-cent deposit.

Rocky did the math in his head, and that’s 4,000,000 empty cans!

The charity’s can-collecting seems especially odd since Wells Fargo and US Bancorp both said that they will donate the same amount of money directly to local charities.

Rocky’s three theories:
1. The local charities saw local homeless people living high on the hog (collecting empty soda cans,) and they wanted a piece of the action.
2. A weak economy and high unemployment rate correlates with increased beer consumption — and those empty cans are strewn in the streets and parks.
3. It is a publicity stunt on the part of the charities.

Click [here] for the full story.

Gentlemen: Start your scooters

Rocky notes that Legendary Physicist Stephen Hawking reportedly is “up in arms” over a new EU tax on scooters for the disabled.

The new 10% import tax (perhaps to protect the burgeoning domestic scooter industry) was devised by a little known sub-bureaucracy (the “World Customs Organization.”) The WCO places scooters in the same tax classification as Formula 1 race cars.

Previously, the UK exempted equipment for disabled people from tax.

The USA fortunately rejected the World Customs Organization’s absurd analysis — which means that handicappers at the next Indy 500 can expect that race to proceed at Formula 1 speed, and not at the pace of a motorized scooter.

For the full story, click [here].

Radiation, radishes & ridicule for Mrs. Obama

It looks like old-guard Soviets may be beaming radiation at the White House again. That is Rocky’s explanation for the rapid and bountiful vegetation growing in the new White House garden.

On March 19th, the New York Times reported that First Lady Michelle Obama would plant a White House vegetable garden. [Click here.]

Less than 90 days later, Mrs. O and the students from the Bancroft Elementary School were back at the White House harvesting waist-high crops.

Crops cannot grow this fast (except in the Amazon), so Rocky offers two more explanations for the improbable bounty:

1) Genetically modified crops. Seriously modified.
2) Global warming. In Washington, there is so much hot air that the growing season starts early.

Most likely the crops were planted fully grown — and it’s just a photo opportunity. This sure isn’t Eleanor Roosevelt’s Victory Garden !