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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.]

CPI shows women & children first?

April 15, 2011 2 comments

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.

Japanese stocks yield more than US stocks

March 15, 2011 1 comment

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. ]

Efficient markets meet efficient yogurts

March 7, 2011 2 comments

At the behest of his daughter, Rocky sampled his first “Pinkberry” frozen yogurt in New York City’s Greenwich Village on Sunday. Pinkberry has a cult following, and it was time for Rocky to audition for the cult.

The small cup of plain with two toppings cost $6.25 — and while Rocky found the concoction uninspiring — he found the profit potential intriguing.

An unscientific 10 minute demographic survey revealed all of the customers in the store were ultra-skinny women under the age of 30 and just one skinny man (whose attire and makeup were sexually ambiguous.)  Judging from their fluency in Pinkberry nomenclature, all were regular customers. The tiny store was grossing over $300/hour — on a cold, rainy March afternoon!

Rocky started salivating. Not from the yogurt. From the profit potential!

But before he could grow lascivious about live cultures, Rocky looked out the window and noticed two stores across the street with “Opening Soon” banners in their window.  Red Mango and “YourGurt” had Pinkberry’s prodigious profits in their sights.  A frozen yogurt war would soon commence — and monopoly yogurt profits would undoubtedly become the first casualty….

[Disclosure: All that glitters isn’t gold, and all that shines isn’t Pinkberry pomegranate with strawberries. But the jingle is worth a listen: click here. ]