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.
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…]
The Captain of the Titanic supposedly said, “Women and children first!” when directing his passengers to the lifeboats.
Rocky, (hardly a chivalrous fellow), thinks recent Consumer Price Index data demonstrate “Women and Children LAST!”
He notes that women’s and children’s apparel prices are declining at a noticeably faster rate than men’s apparel prices. (See the bottom three lines of the chart above.) Although Rocky continues to wear the same ragged grey sweater and chinos, Trophy Wife may find this data to be an impetus for a visit to the shopping mall.
Rocky theorizes that women can wear men’s clothes (which support the price of shirts and pants), whereas most men wouldn’t be caught dead wearing a dress or skirt. However, if this trend continues, Rocky’s miserly nature will prevail, and he’ll try on a kilt or two.
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!]
For the first time in decades, the dividend yield of Japanese stocks exceed the dividend yield of US stocks. As of the close on March 15th, the S&P-500 dividend yield is 1.86. After last night’s 10% decline in Japan (and the horrific catastrophe unfolding there), the dividend yield on the Nikkei-225 is now 2.02%. (The chart above shows the S&P-500 dividend yield minus the Nikkei-225 dividend yield using monthly data. It doesn’t include the post-earthquake price moves.)
Determining whether this represents an investment opportunity, or an accurate reflection of the long-term prospects for Japanese industry, is left as an exercise for the reader. Rocky notes that Japanese 10 year bonds yield 1.21% and US 10 year bonds yield 3.24% — which makes this dividend phenomenon even more striking.
[Disclosure: Rocky never provides investment advice. He will also forgo any jokes about the dismissal of the Aflac Duck because it would be inappropriate — as the Japanese people suffer the aftermath of a historic disaster. ]