2-5-2013 TUESDAY AFTER LUNCH MONEY MEMO
“Money, young man, is good for the nerves.” J.P. Morgan
Investing is defined as “Putting some money into something with the goal of getting more money back (after taxes and inflation) later.” Sounds reasonable. Well, I rode that definition a bit on Saturday by visiting my local race track.
Santa Anita Park (www.santaanita.com) is the track that ShowTime used for its short lived series, Luck. I say short lived because 3 horses died during the filming, and they couldn’t put up that “no animals were injured in the filming of this project” disclaimer at the end of the show. The show was scratched.
My friend, let’s call her Serendipity, drove us to SA in her Mercedes SLK. But she’s actually an easy going, sit on a newspaper on the outdoor stone steps, eat a hot dog, and mingle with ‘da woikas’ girl. Me, not so much.
At my old brokerage house, we had old day-trader guys who hung out near the quote machine, drank our coffee, and schmoozed about stocks during market hours. Those same guys were on the steps at the track. I wanted to elevate our game. After a small amount of dithering, I agreed to put on the borrowed blue blazer jacket that unknown visitors to the upstairs Turf Club are required to wear, and they waived the $20 entrance fee. (I’m still not sure why I was treated so well…could have been Serendipity…) As a matter of fact, for the price of a 75 cent newspaper, they’d let both of us into the Park for free, waiving both $8.50 admission charges. Don’t they need fees? It felt like the initial snort of free cocaine by the local drug pusher.
Having been seated in the nicely carpeted restaurant by a race track Maitre Di, and enjoying an adult beverage, my brokerage account was open. Now, how am I gonna make some money here?
Well, there’s the Daily Racing Form (www.drf.com). The Form, along with assorted books, magazine articles, TV commentators and other assorted materials are what one studies before actually investing in horses. Investing in horses or securities is called placing a bet.
There are also books and articles on investing. Not everyone reads those either. I like the Cliff’s Notes version myself. Wall Street has analysts, known as Tassel Toed Sellouts, who have a system of evaluating securities. Some of their recommendations are called “Aggressive Buy, Long Term Buy, Accumulate, Hold, and Sell.” Mostly, Wall Street tells you to buy. They don’t like to recommend sales. They’re feeding the meter.
At the track, horse aficionados, known as “Touts,” have recommendations too. They call their tips “win, place, show, and out of the money.” They sell these tips, which are their guesses as to how a large hay-burning animal coming from a privileged background, will perform over a certain time period, amidst changing track environments, under different managers, and against real time competition. Sounds a lot like Wall Street.
We commenced wagering, based upon a combination of the aforementioned newspaper, the $2.50 daily program, and the wisdom of a guy named “Eric” whom we had listened to in the Paddock an hour before post time. Eric was seated at a cheap, folding card table and had a microphone in front of perhaps 150 “investors” who happened by. Eric talked about horses he liked. I don’t know if he does this every race day, or once in a blue moon. I don’t know if he was a horse owner or a carpet salesman in from Dinuba. I never even got his full name.
Eric had “pets.” These were horses that Eric had made money on, and would bet on again…even if they were up against horses that were clearly a better class of horse. He had trainers he liked and recommended their horses that were running that day. He talked about workouts, as in, “the horse had had good workouts lately”. Wall Street has workouts too, as in when a company has gone bankrupt. But on balance, Eric was more worthwhile than any number of Wall Street guys. Let’s just call him inside information.
I used his tips throughout the day, and made money. Serendipity had another system. For instance, in the 7th race, she bet her $2 to show on a horse named Ivanhoe. She did this because she liked Sir Walter Scott…the author of the Ivanhoe novel. The horse won by a length. She bet horses with low odds to show all day…and also came home ahead. And she paid for lunch.
Every table in our restaurant had a little TV monitor. And when a race was running, there was split screen of long and close up video, and little numbered, moving boxes of the horses moving along the bottom of the screen like the TV stock market crawl. I assume there were little transmitters on each horse that would send a separate signal somewhere, though occasionally the little squares would get on top of each other. Horses don’t do that, do they?
As I enjoyed my race track outing, I noticed certain comparisons with stock markets. Both stocks and horses involve risk-taking and money, but the action is faster at the track, and there’s more yelling. Horses, like stocks, have seasons. Santa Anita is open/bullish from December 26th through April 21st. Then it’s over. Horses, like stocks have quarterly returns, except the quarter at the track is a physical pole instead of a calendar thing. A big difference was the ambulance that drove around the track behind the horses in each race just outside the view of the TV picture. I assume the ambulance was to help a fallen horse or rider…although I don’t think a horse could fit in the back. There have been times when Wall Street could have used an ambulance.
My day had exciting activities, a beautiful atmosphere, and excellent company. (In Hollywood, they’d call this a “Rom-Com” a romantic comedy.) And at the end of the day, thanks to Eric, et al, I picked 9 horses that ran in the money, including an exacta ticket in the tenth race worth $55 bucks. An exacta is where you pick the horses finishing first AND second in the exact order. I had two other exactas that I missed with the second horse losing by a nose and a neck. I’d started with $300. After totaling in my losing bets, programs, dinner, and other costs, I came home with $302. So that’s 2/3 of one percent for one day. Annualized (at 360 days for a year) would be 240% on the money. Better than a golf ball in the eye.
Should We Be Investing in Securities At All This Year?
The Super Bowl Indicator (SBI) says that if an American Football Conference team (like the Baltimore Ravens) wins the Super Bowl, like they did last Sunday, it will be a bad year for stocks. But as superstitions go, the SBI has faltered in the past decade. Furthermore, since the Ravens are actually the successor to the NFL’s Cleveland Browns, this “indicator” is iffy.
Hyman Minsky said that the higher the stock market goes without a drop, the more likely one is. We’ve had a straightish move UP since March 2009, when the Dow was at 6800. Friday it was above 14,000 and like the recent carnage in Apple, the pros have seen the hype curve do its thing, are taking their profits, and are edging toward the door. Don’t get me wrong. Stocks will continue to be sold and traded. But they will increasingly be manipulated and more influenced by politics than by honest earnings and P/E ratios. The old Buy-and-Hold mantra doesn’t work in a bear market, and I suspect we’re overdue for a return to the Bear in 2013. Triskaidekaphobia, anyone?
U.S. Treasury bonds, the supposedly safest investment in the known universe, are now stupidly overpriced. And with continued Fed rigging, and the “temporary suspension” of the debt ceiling this week, more froth is expected. Jim Dines says, “People inside a bubble can’t see it.” Bill Gross, the bond guru of Pimco, said this week in Barron’s, that his number one pick for 2013 is gold.
Not much works in a manipulated market except government approved investments. Price suppressed gold and silver are screaming bargains now, but as John Templeton used to say, “That doesn’t mean that can’t become even bigger bargains.” I think coins will hold their value because the government can’t make those up out of nothing. But my track record on these has run out of the money lately.
Thinking on a higher plane at the metaphysical Turf Club level…the money track in the two traditional investment areas looks mighty muddy. (And let’s not forget to ignore real estate here…) I suspect we’re going to have to manage money in new ways, and learn to speculate in new areas.
If you’re not speculating now, perhaps you’d better start practicing. But how do you feel about risking money on something you’re not sure of? (Most of us tend to wait too long to get in.) What happens when the safe, conservative market voices you’ve listened to in the past are no longer on their game, or even in the current game? What happens when you listen to a guy – like Eric – who’s apparently in sync with the current markets, but you don’t know him or his track record? Do you ignore him, cautiously follow him, or jump in with both hooves? We’re all heading somewhere new. And some horses may fall or even die.
Trotting along here, if not horsey or securities investing, what activity can you saddle up with that might allow you to stay on top of your money in the next few years? Can you make money at the poker or backgammon? Sports betting? EBay trades? Blogging? Flea market sales? Sell tours at www.vayable.com? Tarot card reading? Whatever it is, don’t get an advanced degree for it, unless you’d like to be overweight in student debt for the rest of your Boomer life. Your new money life will require entrepreneurship, courage, persistence and luck. Giddy up.
Foghorn’s “No-Inflation-Contrary-Indicator” (NICI)
I’m adding a new feature this week, the NICI. It may even be a regular feature. I bought Carlson’s Vitamin D caps 6 months ago – 360 soft gels for $19.35. They don’t even sell that size bottle anymore. The same store sold me a bottle of 120 of “Solar Gels” for $11.99. That would be $35.97…for only allegedly better stuff.