Gold-plated arbitrage

Rocky found some fool’s gold buried in today’s Producer Price Index data.

The year-over-year change in “Karat Gold Jewelry Prices” was 12.1% Whereas the year-over-year change in “Costume Jewelry Prices” was a modest 0.9%.

According to Wikipedia, “Costume jewelry (also called fashion jewelry, junk jewelry, fake jewelry, or fallalery) is jewelry manufactured as ornamentation to complement a particular fashionable costume or garment.”

Since the Government sees fit to include the “all important” costume jewelry price in the PPI, Rocky smells an arbitrage for an upcoming Trophy Wife birthday present.

Rocky currently owns  gold in his investment portfolio, but this price discrepancy suggests that he should consider a “short gold / long fake gold” swap for Trophy Wife’s jewelry box portfolio.

[Disclosure: As they say on TV: "We're trained professionals. Don't try this yourselves at home!]

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.)

Trophy Wife signals likely stock price rise

Jim Cramer may have his “Trading Goddess.” But Rocky Humbert has his Trophy Wife. And when Trophy Wife speaks, Rocky Humbert always listens.

Trophy Wife (not to be confused with Entrophy Wife) is a Mistress of the Universe in her own right. She is also an astute observer of consumer behavior, fashion, and whether Rocky’s dirty socks inadvertently remain under their bed. Trophy Wife vehemently states that she cannot predict the stock market. Rocky believes otherwise.

Trophy Wife went shopping at a large Premium Outlet Mall on Sunday, and observed unusually high traffic and sales. In particular, Trophy Wife noted shoppers aggressively buying at Oscar de la Renta, Burberry, Coach, Gucci, Todds and Tory Burch. Trophy Wife said that even Starbucks was booming.

“I saw so many Gucci shopping bags that I thought they must be giving them away,” Trophy Wife reported.

Rocky carefully tracks Trophy Wife’s observations. In past reports of such high activity levels (this rates a “10,”) there has been nearly a 70% probability of higher US stock prices over the subsequent week.

Many factors contribute to stock price movements, but given the current, bearish macro-economic climate, Trophy Wife’s report is especially interesting.

[Disclosure: Rocky does not give investment advice, but he intends to nibble during stock market weakness on Tuesday, based entirely on Trophy Wife's track record. Rating: Rocky III ]