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.
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! ]
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.
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. ]
Rocky tips his hat to the uber-quants at Barclays Capital for creating an “index” (fund) that only Cramer (of Seinfeld fame– not Mad Money fame) could have dreamed up.
From their website: (see: https://ecommerce.barcap.com/indices/index.dxml )
The Barclays Capital TOM™ Long Index invests in the relevant underlying equity benchmark Index on the close of the 4th business day before each month end and closes this position 3 business days after the same month end. The Long Index is not invested during the rest of the month.
The Barclays Capital TOM™ Long/Short Index takes a short equity position on the close of the 11th last business day before each month-end and closes this position on the 5th last business day before month-end. It then takes a long position Index on the close of the 4th last business day before each month end and closes this position 3 business days after the same month end. The long/short index is not invested during the rest of the month.
BarCap also has a series of funds aptly named the “Barclays Capital Astro Index.” This inspired Rocky to propose the following variations of this bizarre approach towards so-called “investing”:
1. The Rocky Moon Fund (Buy on the New Moon, Sell on the Full Moon).
2. The Rocky Blue Moon Fund (Sell EVERYTHING on the Blue Moon, buy it all back 1 day later).
3. The Rocky Lunar Eclipse Fund (Buy on the eclipse, sell 2 hours later).
4. The Rocky Solar Eclipse Fund (Stare at a solar eclipse and buy health care stocks.)
[Disclosure: Rocky acknowledges that markets rise and markets fall. But flipping a coin may well be a better approach than investing based on the day of the month. Statistics don’t lie. People lie with statistics. ]