January 21-2012

It may not seem important to financial markets at the moment but something is going on in Afganistan which in the not too distant future should illuminate a potentially dangerous, large and  loose stone in our wall of worry. 

On January 20, 2012 the New York Times led with a front page story describing the deep seated animosity and distrust which exists between the American  forces and the  Afgan soldiers they are training to defend the country against the Taliban. 

The Times states this situation has resulted in an increasing number of American deaths and casts a harsh light on our 10 year ( yes, 10 year ) attempt to build an independendent Afgan army that will defend  efforts  to develop the institutions of a modern nation.

Does anyone  actually believe our lofty goals are achievable or will last  for any length of time after we depart ?

Or, is it more realistic to think that the result will be similar to our covert training of  Afgans to bring down Russian helicopters? … with all the training turned on us.

How many more American lives are to be invested in this objective ?

Upon what realities and assumptions is this objective based ?   

How much of it is driven by the need of our defence industry for sustainable  armament outlets ?

How much is based on the belief  the world is a community made up of political entities called nations ? 

Truth be told,  the only real nation we are facing in the middle east is Islamic Fundamentalism, an aggressive revolutionary movement which is just as dangerous as the  Bolchevik, Facist and Nazi movents of the 2oth century. It is driven by extreme and intolerant  religious beliefs , not politics .  Submit ….or else!   And. right now lets draw a distinction between the Moslem religion and these zealots who take the peace loving Moslem religion and twist  it into a  War of the Worlds type jihad against infidels with no quarter asked or given

When I had my business I used to import precision instruments from Elmar Messerschmitt of Munich.  You may recognise the name as the same as that of his uncle,  the developer of the Messerschmitt 109 fighter plane.  Once on a joint trip to Nashville during the  early eighties I asked him whether he thought East and West Germany would ever be reunited.  His answer was “My dear Dick, if it was the intention to keep Germany permanently divided it would NOT  have been east and west, it would have been north and south.  Why ?  Because the south is Catholic and the north is Protestant and more separations, wars and hatred have arisen from this type  of distinction than from a line drawn on a map separating east from west “.

Which brings us back to Moslem Fundamentalism.  Forget about Tunesia, Algeria, Morocco, Egypt, Saudi Arabia etc. These nations are seen by Fundamentalists as imposed entities obstructing the ultimate reality, one Moslem Fundamentalist Nation.  And, you can be certain the Fundamentalists  believe in the inevitability of this as surely as 19th century Americans belived in Manifest Destiny.

I believe our well meaning investment  in  the dream of  a friendly Afganistan nation  is a total waste of American resources, the most valuable of which is the blood of our boys.  Its a mirage !   And what about the poppies ???!!  Is that how tentative our situation is ?  We can’t disturb that criminal situation ?! Give me a break ! Lets get out now and allow sand to fill our  footprints sooner rather than American graves later.  Our time would be far  better spent in designing plans to frustrate the hopes and wishes of Moslem Fundamentalists to have us all riding donkeys. 

Lets design ways to frustrate the Fundamentalist  goal of  attacking the world’s political and economic institutions. including its financial and communications infrastructure.   

We know who the bad guys are …Pakistan and Iran.  All the rest, including the Saudi royal family are considered dominos to fall sooner or later with  Pakistan and Iran developing  their doomsday arsenals as guarantors of  any progress made.

Egypt and Libya are all smiles on facebook at the moment. Just wait. All that can change in a hurry. The Moslem Brotherhood is working hard behind the scenes toward what they see as inevitable.  And when that happens Egyptian and Libyan smiles will be at a premium ! Even more ridiculous, if we help the Syrian uprising we will be fighting shoulder to shoulder with Al Quaeda !

If the Moslem Fundamentalist are not checked , checked hard, at some point soon,  we may not  need to worry about catching the next market updraft  because there won’t  be a viable market infrastructure , never mind the updraft.

Richard Gore aka Rich, Richie, RMG, Dick and Smiley from Woodlawn

January 11, 2012

I have been in cash, I mean cash,  since December 20, 2011.

This is out of respect for a secular bear market which may not end for a year or two and all the systemic cracks which are beginning to appear on our  ” wall of worry ”

That being said, no market rises or falls in a straight line, and there are bound to be occasional, tradeable bull reversals before the final positive breakout which ushers in a secular bull market, and ends the bear trend which started in 2000.

With $1,000,000 to invest, I am looking at annual money market interest income of $5,000 to live on unless I am willing to bear some risk to earn more.  When I had a business, the way I approached a reasonable return on investment was to aim at a return of 3x the 10 year Treasury rate and add a kicker of 3% for inflation.  At present, that means 9% per annum.  How much risk do I need to take on to achieve a 9% return on my investment ?

It doesn’t mean I need to be invested all the time.  It does mean I need to be invested at the right times to snatch 3% here and there and then cash out.  It means giving as little as possible back by successfully interpreting market signals before the herd turns positive or negative.  I have confidence that I can do this. Also, It means managing risk by picking symbols with the best upside potential.  I have confidence I can do this.

Where do I begin.  Well, we are in the November / May time frame so that is a positive.  If you start at the top and look at the Dow, S&P 500 and QQQ going back 10 years, you will see the Dow has provided a total return ( including dividends ) of 40% while the S&P 500 has returned only 9.5% and QQQ negative 34%.  So, I think I’ll have less risk in the blue chips.  I’ll eliminate big cap financials and concentrate on the highest dividend payers.  Ten Dow stocks should provide some diversification against specific risk and by picking the biggest dividend payers I’ll get some cushioning against a surprise drawdown.

So, Im going to begin by dividing my $1,000,000 into 25 positions of 4%  ( $40,000 each position ).  This first investment of 2012 will be for $40,000 further divided into 10 mini  positions of $4,000 apiece.  As a portfolio these 10 stocks project an annual dividend return of  3.974 %  so, ( if I had the whole million invested in these 10 stocks ) I’d at least have $39,740 income instead of $5,000 ( money market ) even if the 10 stock portfolio doesn’t budge.  All this without getting fancy on you and  selling  calls against various of these ten positions to wring additional income from these selections.

But, I am also investing in 24 additional positions of 4% ( $ 40,000 each ) , but only 50% of each 4%,  ($20,000 each ) for now . and only in seven positions of the ultimate 24.  The themes of these positions are DJ transportation, USA industrial materials and mining, USA oil and gas exploration, USA residential housing, and USA small caps which range in capitalization from $50 million to $3 billion. To me, at this juncture, the  rest of the world seems too iffy for a risk manager….global diversification be dammed !

So that’s $180,000 now  invested in eight of 24 projected positions ( 1 x $40,000/10 and 7x $20,000 ) ….Stay tuned

Contact me for the 8 positions if you want to consider copying  me…no charge.

Richard, aka Rich, Richie, Dick, RMG and Smiley from Woodlawn