Rocky occasionally peruses his favorite magazine store for investment truths using the “Magazine Cover Contrary Indicator.” Unfortunately, Rocky’s local store doesn’t sell Time, Newsweek or Business Week. Rocky’s local magazine store sells mostly lurid “periodicals,” “videos,” and cigars.
Hence, Rocky needed to develop his own contrary media indicator — independent of bulls, bears, and cleavage.
He found one!!
Bloomberg Radio occasionally adjusts their hourly market summaries. Bloomberg no longer even mentions the overnight change in the Japanese Stock Market (up 15% year-to-date); but instead they quote the “yield spread” on defaulted Greek Bonds. For Rocky, this is a very bullish omen for Japanese stocks. And it also means that Greece is irrelevant. (Rocky also noticed his local magazine store has increased its inventory of extremely lurid Shukanshi.)
[Disclosure: Rocky NEVER gives investment advice and he reminds readers that sometimes a “Cigar is just a cigar.” However, he confesses that this “radio indicator” contributed to his decision to recently buy some Japanese stocks (currency-hedged) such as the DXJ and NKY Japanese Stock ETF’s. He may stay with this position for a long time, or he may spit it out tomorrow like a bad cigar.]
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?
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….]
The term Roach Motel (“where roaches check in, but they don’t check out!”) was coined by Black Flag pesticides in a decades-old advertisement. Judging from Rocky’s recent experience, Groupon membership is quite similar.
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:
Knowing that he’s been a gold bull for years, Rocky’s friends keep asking: “What you do think of gold, NOW?” (These people actually think that Rocky and certain other TV commentators can predict the future.)
Rocky’s answer: “I have no idea, and have NEVER had any idea about what the price of gold will do tomorrow.”
But does he still own gold?
“Yes, and I also own some stocks. And I own some real estate. And I own some bonds. And I own a copy of last week’s People Magazine. And I have no idea what the price of these will do tomorrow either. My experience has been that pundits who claim perfect knowledge of the future are generally either liars or idiots. (Whoopi Goldberg is the exception to this rule.) What I’m doing is called diversification.”
But when will he sell gold?
“The PRICE of gold is irrelevant. As I’ve written on this blog, I will sell gold when the gold story (or more accurately, the market’s perception of the gold story) changes! Gold’s ascent is a confluence of negative real interest rates; undisciplined central bank behavior; a growing loss of confidence in government policies and financial systems; loss of Swiss bank secrecy; an accumulation of economic wealth by individuals in parts of the world without stable property rights and rule of law. Can gold drop $100 tomorrow? Sure it can! Can gold drop $300 next week? Sure it can! Can gold drop $1000 next year? Sure it can! But so long as these FUNDAMENTAL factors remain in place, the underpinnings and demand for hard assets that are beyond the reach of governments will remain.”
“Almost all of my really smart friends are very bearish right now. They all think this move is idiotic. Many think this is a bubble. And eventually they will be right. But eventually could be a really really long time. And it could include a trip to unimaginably higher prices first. Their skepticism is not predictive of anything. And importantly, they are not betting that gold will decline either. All it tells you is that they aren’t long gold and missed this move. I’ll admit that I get nervous when prices rise quickly. And historically, buying after a sharp rally isn’t a good idea. But why should any of this market chatter affect my long-term porfolio construction/diversification? After all, I’m not afraid to admit that I have absolutely no idea what prices will do tomorrow.”
[Disclosure: Rocky NEVER gives investment advice. He’s owned gold for a long time. And he owns some hedges that will protect him if gold drops sharply while he’s asleep. And some day, he will sell his gold. But whether it’s at $2,000/oz or $10,000/oz is out of his control. It’s in the control of millions of other investors around the world, and how they react to the policies of their central banks and governments.]
Rocky penned the following brain-teaser for the pages of an august publication — and wants to share it with his loyal readers…as it highlights an important market foible:
“I’m sure that we’ve both noticed that whenever Moody’s or S&P release a bearish
press release about the sovereign AAA rating, the stock market gets whacked by
1+%, but the US bond market hardly moves (or even rallies). One can explain the
downward move in stocks by observing that “in times of uncertainty, people
reduce their risk and seek the safety of riskless investments.” But is this
rational? Here, the increased uncertainty is arising from the RISKLESS asset.
So, if the riskless asset is becoming more risky, must it follow that the risky
assets are proportionately more risky? That is, if you sell the risky asset
because you’re scared of the riskless asset, does it follow that you should buy
more of the riskless asset even though it’s becoming more risky, and that’s
what made you sell the risky asset to begin with?
[Disclosure: Rocky expects that if Congress raises the debt limit without substantial spending cuts, bond yields will rise sharply….]
After Rocky finishes reading the National Enquirer, he turns to the Guinness Book of World Records to find investment themes.
Question: What technology company and product holds the Guinness World Record of being the “fastest selling consumer electronics device ever?” [Hint: it happened in the past 12 months.]
Answer: Click here for the answer.
[Disclosure: Rocky never provides investment advice, but he admits that he has started purchasing shares of the company that manufactures the Fastest Selling Cosumer Electronics Device EVER! ]