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Updating the “Magazine Cover” Indicator

February 28, 2012 Comments off

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.]

Investment advice for Ron Paul

December 30, 2011 Comments off

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….]

Why Groupon resembles a ‘roach motel’

November 11, 2011 1 comment

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.

Groupon (GRPN) went public recently after some substantial kerfuffles with the SEC. In their IPO filing, GRPN said that they had over 50 million subscribers as of December 2010 (page F-37 of SEC Form 424B4) and by September 2011, that number had grown to 143 million!!  Notably, in 2009, GRPN had only 152,000 subscribers (of which 43,000 made purchases) whereas in 2011   29.5 million purchases were made by the 143 million subscribers. This means purchase activity among Grouponers declined from 28.3% to 20.6%. (If one considers that 16 million customers made multiple purchases, the activity percentage is declining much faster.) That GRPN paid people real cash to “join,” and that they have never been profitable is beyond the scope of Rocky’s “roach motel” insight.
Rocky doesn’t  like crowds, and he didn’t like being one of the 143 million Grouponers.  Also, as a bald man,  he loathed  the daily 20%-off Groupons for hair removal services. (There were never any discounts for hair retrieval services.)  Fed up,  he tried to “cancel” his Groupon membership yesterday. Alas, there was NO ability to do that on their website, nor were there ANY  instructions on how to cancel membership.
Rocky sent an email to GRPN “customer support” with the question: “How do I cancel (and close) my Groupon Account?”
The response:  “You will no longer receive any promotional emails from Groupon. Please note that in the future you may receive transactional emails regarding past or future purchases made though your account and important business announcements that could affect your rights as a customer. You may receive an email if we update our privacy statement or our terms of service.”
Presumably this means that GRPN still numbers Rocky as one of the 143 million, but they won’t send him any more emails for nail salons, cooking classes, and discount sushi.
Gone, but not forgotten….
The cancellation experience reminds Rocky of  Antony’s speech from Shakespeare’s Julius Caesar,  “I come neither to bury Groupon, nor to praise them. But the evil email address that Groupon captures lives on after them.”
[Disclosure: Rocky never provides investment advice and currently has no Groupon stock position. He notes, however, that Black Flag Roach killer comes in both “fragrance free” and “fresh pine scent.”  Here, he smells a rat.]

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

September 20, 2011 1 comment

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

 

 

 

 

 

 

 

 

 

 

Rocky’s (latest) view on gold

August 23, 2011 5 comments

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.]

Making one head(s) spin: the US credit rating

July 26, 2011 5 comments

 

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….]

Trivia triggers technology titillation

May 27, 2011 7 comments

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! ]