TFN eNews 06/29/2009: “150 years for Madoff, 20% for TFN readers”
Published via e-mail broadcast on June 30, 2009
This was published via e-mail broadcast on June 29, 2009
In today’s TFN eNews:
* Where to prospect for aluminum after last weekend
* 150 years for Madoff, 20% for TFN readers
* Welcome back, Carter — in Hong Kong?
Dear TFN Reader,
Last weekend’s canoeing trip on the South Fork of the Shenandoah River provided a perfect metaphor for investing in the post-Bush era.
(Across the office, Ms. Cadden is making a face: She abhors metaphors, especially those of the sporting kind. But I will not be deterred.)
You see, in theory, the Shenandoah has enough of a current to give you a bit of a shove as you paddle past mountains, cow pastures and hillbilly trailer parks. And there are plenty of rapids that could make things interesting.
If the water’s just high enough.
But when the level is merely middling, the geology of the riverbed becomes an obstacle. Because every couple of hundred yards, there are spiny shelves of hard rock running across. With a substantial current behind you, these things are fun: The drop they provide propels you forward with entertaining speed. It’s like having your portfolio positioned right in a boom market, with rapid after rapid increasing the fun of the experience.
Otherwise, it becomes a drudge: The current pushes you along through the calm parts. You try to figure out what “tongue” of dark green you should follow into the rapid, just like you’re supposed to. And then you hit bedrock. The impact can be so forceful it knocks you off your knees as the keel grinds itself into the obstacle. You have to get into the water, dislodge the canoe, and drag it a few yards across spiny rocks until you can rejoin the flow.
Just like investing in the New Era, watching a portfolio of Damn Good Stocks advance and then drop again for no good reason.
The metal abrasions left by the grinding keels of our fleet of ancient aluminum canoes last weekend will throw off metals prospectors for generations!
And still, even at moderate water volume, the rapids can be quite dangerous. My oldest son overturned his canoe in the middle of Compton Rapid, a mere Class 2 on a good day. He managed to get out from under it and escaped with a few scrapes. His canoe, however, was bent lengthwise at a 45-degree angle by the incredible force of the water. The rocks punched a whole the size of a baseball into the aircraft aluminum hull.
Dripping water mixed with plumes of red, he seemed thrilled about the experience. I guess true enjoyment always involves a certain levels of risk.
He may turn out to be a great investor one day!
Surveilling, the damage, I calculated that our shipwreck cost around $800 for a new canoe at the retail level. Luckily, being the property of our Boy Scout troop, the Collective will pick up the tab for the steering mistake of one of its members.
Just like in the New Era.
I may yet get to love socialism!
***A U.S. District Court in Manhattan sentenced Bernie Madoff to 150 years in jail for his multi-billion-dollar Ponzi scheme. In Baltimore City, you’d have to kill an entire neighborhood to get half of that time behind bars.
Much ink and airtime was devoted to the harrowing tales of victim’s sufferings.
Call me callous, but I find it difficult to muster much compassion. Madoff didn’t take just everyone’s money. You had to know someboy who knew somebody to be taken on to be taken in. In fact, people were lining up to hand him their capital… in the expectation of making more money than they could expect making elsewhere… in U.S. Treasuries, CDs, or good, old-fashioned individual equity investing.
It’s become popular to blame every financial crisis on the “greed” of financiers and bankers. It makes people feel virtuous and morally superior. Even though the “greed” of the financial world, measured by percentage points of gain on any given assets, was by and large lower than the “greed” of the Madoff victims.
Overall, the Madoff debacle serves as a timely reminder that when it comes to money, there’s only one person who truly has your financial welfare at heart: That’s you yourself, and nobody else.
Except, maybe, your loyal TFN research team:
I just tallied up the free stock recommendations we’ve provided since late May in our free From our TFN Special Research Reports.
Out of the picks we provided in The Top 5 Oil Stocks for 2009 (05/20/09), we sold BMB Munai Inc. for 20.4% gains on June 1, and we sold TRGL for 79.3% gains on June 15. Now Calumet Specialty Products Partners (NASDAQ: CLMT) is up over 20% from our initial buy price of $15.81.
From Today’s top 3 stem cell stocks under $6 (05/11/2009), 2 of our 3 picks are currently up over 20% our initial buy prices: Curis Inc. (NASDAQ:CRIS) and Sangamo Biosciences Inc. (NASDAQ:SGMO).
Now, if you ask me, the best way to use these gains would be to take $79 and give our premium service Hot Stock Confidential a 3-month try. So far, we’ve taken 34 double- and triple-digit gainers this year… and right now, one of our stocks looks like it could become #35 any day now. This could be the best investment you’ve made this year. (Read more about this right here!)
Even better, we’ll even refund your money if you’re not entirely happy with us!
***Looks like Hong Kong is enjoying a bit of a real estate boom again:
Mortgage rates have dropped so low that home sales rose 42% by volume in May, the biggest increase since February 2008.
The three-month Hong Kong Interbank Offered Rate has clocked in as low as 0.33%, the lowest since January 2005.
Now here’s a thought. The Hong Kong dollar is pegged firmly to the U.S. dollar. The surrounding boom areas of China use the yuan, which has been moving up against the dollar and is only kept low by Beijing’s concern for keeping Chinese exports competitive.
Now, think back to the U.S. real estate boom in the Carter era. Inflation back then was over 15% a year. Real estate rocked!
But let’s consider it right. Real estate was only a vehicle to hedge against inflation. You bought real estate because you borrowed money that you reckoned would become worthless over time. You really used debt to hedge against inflation, counting on the devaluation of the U.S. dollar to take a hefty bite out of your obligations: You borrowed a thousand dollars, and paid back $850 in real terms the following year.
I suspect something similar is going on in Hong Kong right now. The Chinese are quite concerned about the inflationary effects of the Obama Administration’s going-for-broke borrowing. Rightfully so. But when the dollar devalues relative to the yuan, so will the Hong Kong dollar. Debt denominated in that depreciating currency could soon be serviced with appreciating yuans… a double benefit to smart hedgers!
In the United States, government interference is still keeping too many foreclosed and foreclosing properties off the market to truly fuel a mortgage rate-based competition among banks. When that shoe drops and banks begin to truly compete on mortgage rates to rid themselves of worthless real estate inventories, it may be time to dust off the Carter-era home economics: Buy real estate not for its inherent potential to appreciate.
But go deep in debt in the expectation that it’s no longer your money that will do the depreciating.
Quote of the Day:
“The cap-and-trade bill is a travesty. Its net effect on short- to medium-term carbon emissions will be small to none.”
– Clive Crook, Financial Times
Recommended Reading
“NCI Building Sytems: Blame it on those greedy shorts”
“Gold and Resources: 3 Stealth Stocks that could turn $2,500 into $25,000″
Today’s Top 3 Financial News Headlines
Wall Street Journal – Honduras Defends Its Democracy — Fidel Castro and Hillary Clinton object “It remains to be seen what Mr. Zelaya’s next move will be. It’s not surprising that chavistas throughout the region are claiming that he was victim of a military coup. They want to hide the fact that the military was acting on a court order to defend the rule of law and the constitution, and that the Congress asserted itself for that purpose, too.”
Telegraph — China’s banks are an accident waiting to happen to every one of us “China’s banks are veering out of control. The half-reformed economy of the People’s Republic cannot absorb the $1,000bn (£600bn) blitz of new lending issued since December. Money is leaking instead into Shanghai’s stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump.”
Bloomberg.com — Dollar Falls Most in Month as China Urges New Reserve Currency “Data from the International Energy Agency showed last week that Gazprom’s market share in Europe and Turkey plunged The dollar declined the most against the euro in a month and dropped versus the yen after China repeated its call for a new global currency.”
Next Article: Iraq’s oil auction: No parade for the oil markets
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