Glitter In The Air

It's only half past the point of no return
The tip of the iceberg
The sun before the burn
The thunder before the lightning
The breath before the phrase
Have you ever felt this way?

"Glitter In The Air" by P!nk

Must See Video:

P!nk - Glitter In The Air (GRAMMYs on CBS)

My daughter was tapping away on her cell phone, while I was watching the news, when she overheard some talking head use the phrase "negative growth," she asked, "like, what does negative growth mean?" Out of the mouths of babes! I had to laugh because it really is a ridiculous term dreamed up by political economists to put a positive spin on bad news. I had never given much thought to the term until then. "It means," I said, "economic contraction and recession." "Well, why don't they just say that," she asked? "Because governments do not like their citizens thinking that the economy is shrinking, it reflects poorly on the politicians."

The news program I was watching at the time was discussing Europe's new found austerity measures, and our Treasury Secretary, Timmy Geithner's, admonishment that they were all moving too fast and they should continue to spend what they do not have. This is huge news (not spending what you don't have, but austerity). As the G-20 get set to meet this weekend the world's leaders are at odds over whether to continue printing, borrowing, and spending what they do not have, or to implement some austerity measures in order to get their run-away deficits under control. The Europeans have decided to walk ever so gently into austerity before Mr. Market forces them there, while the Americans have decided to go kicking and screaming. 

In order for the Europeans to bring their economies in line with EU guidelines specifying deficits be no larger than 3% of GDP, they are all about to experience "negative growth." Britain's new coalition government has just announced a new budget package that through spending cuts and tax increases will be worth $188 billion a year by 2015-16. 

Last week President Obama sent a letter warning the G-20 that a premature withdrawal of government support could derail the global economic recovery. Meanwhile, German Chancellor Merkel hit back by saying that, "Growth cannot come at the expense of high deficits, but that growth must be generated in a sustainable fashion." This is shaping up to be the most contentious G-20 summit in its short history. At the height of the economic collapse in 2008 the G-20 were all in agreement, "Throw money at it." But, now with uneven recoveries around the globe the leaders are clearly at odds with each other.

"It's only half past the point of no return." I believe we are at a pivotal point in economic history, where the overextended developed countries are faced with the unappetizing task of shrinking their economies, while counting on the emerging markets middle class to take over as the globes growth engine. Bernanke at the Fed, Geithner at the Treasury, and Obama at the White House, all believe that our economy is much too weak to survive any form of austerity, and that the government can keep us from ever experiencing a long recession. Considering how poorly the massive government stimulus is doing to revive our economy, is it any wonder that the Europeans are taking a different tack? This week we saw the dollar weaken versus the Euro, the Chinese announce some Yuan flexibility, and gold strengthen. Home sales in the US were abysmal, and we're probably looking at another two years before home prices bottom (even with 30 year mortgages at 4.7%). In the near term deflation continues to be the biggest risk. The government is doing everything in their power to keep you and the world spending, they make it increasingly painful to keep money in cash at 0%. But history has proven again, and again that when the government is forcing you to do something you should probably run the opposite way. So if the government is trying to force you out of savings, save even more! 

Europe is Contracting, with a capital C. The speed of change is breathtaking. With Europe contracting and the US severely overextended, it is hard to envision our economy not slipping back into recession, or at the very least minimal growth. Stay defensive, and stay liquid, there will be some interesting opportunities in the future, but you need to survive until then. We're in the early innings of this game, survival is the key. "It's only half past the point of oblivion."

Investment Considerations:

Where do we stand?

US Equities -- Neutral, but moving towards Bearish

Int'l Equities -- Bearish for EAFE and Neutral for emerging markets

US REITs -- Bullish but weakening

Int'l REITs -- Bearish

Gold -- Bullish, not overbought and still strong 

Commodities -- Bearish

US Fixed Income -- Bullish

Int'l Fixed Income -- Bearish, but emerging market debt stabilizing

Cash Equivalents -- Still at 31.5%. Our 5% in Chinese Yuan getting a little lift. 

That Glitter In The Air May Just Be Gold

I haven't written about gold in quite some time. I am a huge fan of gold, that investment that is dug out of the ground at great expense, cleaned up, and then put back into the ground (safes) at additional expense. It earns nothing, pays no dividends, and can't be valued...what's not to love! Golds appeal is that it is the World's only real money, it is not beholden to any government. It is insurance against government folly, and that is exactly why it has been in such strong demand over the last several years.

News came out this week that the Saudis have secretly doubled their gold reserves. Secretly, because you don't tell everyone you are looking to buy 150 tonnes of gold. ATMs in Dubai now dispense gold, citizens in Europe and the emerging markets clamor for gold, emerging market central banks like China, India, Russia, and the Philippines are all buying gold. Large hedge fund managers are buying gold. What do they have in common? They all have various levels of distrust in the developed markets central banks to get it right. 

Whose selling? Watch this video:

US To Trade Gold Reserves For Cash Through Cash...

Obama's Right Hand Man Resigns as Head of Congressional Budget Office:

When you look at this chart based on Congressional Budget Office data is it any surprise that Peter Orszag resigned (other than he needs to make some serious $$ to support his illegitimate child and new bride). No one in his right mind would want to be associated with this fiasco for very long. When it comes to taxes we are essentially screwed. The chart below shows that the average American household will see a $2,000 tax increase by 2015, which will grow to more than $12,000 by 2050. These numbers factor in inflation and income growth, in other words these are real tax increases.

Geeky Economist Humor:

An economist, a chemist and a physicist are marooned on a desert island. 

Their only food is a can of beans, but they have no can opener. 

What are they to do?

The physicist says: "Let's try and focus the tropical sun onto the lid--it might melt a hole."

"No," says the chemist. "We should first pour saltwater on the lid--maybe that will rust it."

The economist arrogantly interrupts:  "You're both wasting time with all of these complicated ideas. Let's just assume a can opener."

Why We Love Sports--The World's Reaction to US win!

5:38 Add to queueAdded to queue

Be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

    

The New Millionaire Next Door Part II

Wow, I stirred up a hornets nest with my "New" Millionaire Next Door article, and it has been nearly 100% positive. I've even heard from a couple of teachers who couldn't be more concerned about how the state expects to make good on their promises. Just to clarify, most teachers and other State employees are fabulous people and I absolutely have nothing against them earning the best living that they can. I am especially grateful to the teachers who take my children under their wings every day! The point of the article was to show how unsustainable the current system is.

The real culprits here are not the employees, it is really the unions and the legislators. I don't even blame the unions that much since they are just doing what they always do...leach on to something and suck it dry. No, the real blame falls on the shoulders of our financially challenged legislators. 

In my prior career I managed a portion of PSERS and SERS investment portfolios. I've been to Harrisburg numerous times, sat in the Treasurers office, and presented to the investment committee. While there are some relatively bright investment professionals actually working in the Treasurers office, the problem arises when it comes to their bosses. The politically correct way of saying it would be that their bosses (predominately elected officials) are financially challenged. They bought into the erroneous belief that just because stocks returned 8% a year "on average" over the prior 60 years that they would return 8% every year into the future. They also believe that their portfolios should return at least 8% a year since they are hiring the best money managers that their consultants recommended (in actuality the PSERS portfolio returned 3.28% annually for the ten years ending June 2009) . Of course they don't want their portfolios 100% invested in stocks (that would be too risky), so they diversify with bonds (yields under 4%), private equity (extremely illiquid), and hedge funds (illiquid & volatile returns). So they use a targeted actuarial return of 8% (it used to be 8.5%). Now there is actually no way in hell that a diversified portfolio is going to earn 8% annually over the long-run! Treasuries yield a whopping 3%, cash is at 0%, and the ten year return on stocks is negative! I can't tell you how many times I sat there and tried to explain the difference between total return and current yield. I think these people even believe the Fed and Treasury, when they say that we have "a strong dollar policy". Put simply, they are clueless when it comes to understanding the financial markets.

 

But, don't they hire consultants and financial professionals to take care of the investment portfolios? Of course they do. But, the consultants and financial professionals tell them what they want to hear. They want to hear that they can achieve their actuarial targets so they don't have to fund their plan, and consultants don't want to tell them that they can't get an 8% return because they will find another consultant that will tell them they can. It's an insidious game. The sad thing is that we are all stuck paying the bill for their ineptitude.

What can be done? Of course we don't know exactly how this is going to play out, but an educated guess goes something like this:

First, they try to extend the severe tax hikes by spreading them out longer. We still pay significantly more in taxes, just a bit less in the early years. Overall the tax bill is higher.

Second, they try and make some cuts in the benefits for new employees. Some strikes should be expected.

Third, they try and cut into the benefits of existing employees. Strikes are a certainty.

Fourth, they try and cut benefits to existing retirees. Huge uproar, and strikes are a certainty.

Lastly, a prepackaged bankruptcy (PC Restructuring) will ensue where the States bond holders will take a hit, and the States employees and retirees will take a hit. 

It will be long and ugly, but the simple fact is that the system is bankrupt. The sooner we wake up to this Fact the lower the ultimate bill to the tax-payers will be.

Here is the link for PSERS 2009 Investment Review...WARNING this is not appropriate for anyone with a weak stomach! The portfolio declined from $63.9 billion in June 2008 to $43.3 billion in June 2009, a stunning loss of $20.6 billion. This is your loss!

http://www.psers.state.pa.us/publications/cafr/cafr09/Investment%20Section.pdf

The Transition From The Dollar To A New Reserve Currency:

Jim Rickards is one of the foremost authorities on currencies, and in this excellent interview he talks about how the G-20 are starting to plant the seeds for a transition to a new reserve currency.

With gold hitting new highs I thought it was pretty timely.

http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2010/6/14_Jim_Rickards_files/Jim Rickards 6:14:2010.mp3

Steve Wynn, the entrepreneur who led the rebirth of Las Vegas and in the process became the 468th richest man in the world, had some pretty choice words for "those hypocritical SOBs in Congress." Enjoyable T.V.

http://www.cnbc.com/id/15840232?play=1&video=1506508223

A little Friday humor on BP's handling of a coffee spill.

BP Spills Coffee

The "New" Millionaire Next Door

The "New" Millionaire Next Door

In 1998 a book came out titled "The Millionaire Next Door" by Dr. Thomas Stanley and Dr. William Danko. The good doctors preached a simple formula to becoming a millionaire; live well below your means and choose your occupation wisely. They said the neighborhood millionaires were most likely to be small business owners who saved and sacrificed for decades, in order to be able to retire without fear of outliving their money. When they said choose your career wisely, they should have also said choose your union (and clueless state legislators) wisely!

Todays new millionaires next door are not the small business owners creating jobs and wealth for their communities. No, todays millionaires are state employees, policemen, firemen, and especially teachers. Not only do these private sector workers make 30% -- 40% more than their public sector neighbors in annual salary, they totally blow them away in retirement benefits.

Now I live here in beautiful Mt. Lebanon, PA. where our school is ranked in the top 6% of all public schools in the nation, and I love it, I'm just not sure how much longer I can afford it. The top teacher salaries in Mt. Lebanon are now over $94,000 (the average is slightly more than $60,000). While $94,000 is certainly respectable the real kicker is the guaranteed pension plan. My local elementary school just had a party to celebrate the retirement of three of our educators, now we don't know exactly what these teachers were earning, but considering the number of years service we can safely assume that it was at least near the $94,000 number. So what does this retiree have to look forward to in retirement? A lot! Lets do the math:

The formula is pretty straight forward, a teacher gets (2.5 x the number of years worked) times the average for the three highest years salary for the rest of his or her life.

So if our retirees started fresh out of college at the age of 22 and worked to 62 (40 years), they would get (2.5 x 40) 100% of their three highest earning years. Lets say our retiring teacher's three highest earning years average a conservative $85,000. They could expect to receive $85,000 per year for life (plus health care benefits). Assuming a life expectancy of 87 (25 years in retirement), what would the size of that retirement portfolio have to be? $1,400,000. That is the net present value of a guaranteed $85,000 per year for 25 years discounted at 4% annual real return ( which assumes no inflation). This is a very generous assumption, historically a real after inflation, return of 2% is more likely. If we assumed this 2% real annual return the nest egg would have to rise to $1.7 million. Not that our newly retired millionaires need to worry about the markets or their investment returns, their returns are guaranteed by you and I!

In Mt. Lebanon our school tax millage rate for '09-'10 is 24.11, the schools projection for '14-'15 is 33.11, an increase of 37.3% over four years.

Now my house is assessed for $524,600, so here is the scary math:

Mt. Lebanon school tax (24.11 mills): $524,600 x 0.02411 = $12,648

2014 est. Mt. Lebanon school tax ( 33.31 mills): $524,600 x 0.03331 = $17,474

An increase of $4,826, and rising.

So I'm paying $17,000 a year to send my daughters to public school, and when they graduate I'll still pay $17,000+ per year.

Here are some of the other tax numbers:

Municipal Property Tax (4.97 mills): $524,600 x 0.00497 = $2,607

Allegheny County Property Tax (4.69 mills): $524,600 x 0.00469 = $2,460

My total property taxes are north of $17,500 and will soon be north of $23,000 (nearly $2,000 per month)!

What does this mean for the average Mt. Lebanonite?

Mean Home Value $250,000.

Median Household Income $77,385

Mt Lebanon School Tax: $250,000 x 0.02411 = $6,027

Municipal Property Tax: $250,000 x 0.00497 = $1,242

Allegheny County Property Tax: $250,000 x 0.00469 = $1,172

Total Property Taxes: $6,027+$1,242+$1,172= $8,441

Now this number will increase by at least 37% over the next four years to $11,564.

What does this mean to our typical neighbor?

Let's say our frugal neighbors put 20% down on their $250,000 home, and have a good mortgage rate of 6% fixed for 30 years. 

Home Mortgage: $200,000 (6% for 30 Years) = Monthly Payment $1,200

Monthly Property Taxes: ($11,564/12) = $964

Other Taxes (On Income of $77,385):

Approximate Federal Income Tax: $6,000

Approximate PA State Income Tax (3.07%): $2,375

Approximate MTL Muni Tax (1.3%): $1,006

MTL Local Service Tax (2 wage-earners): $104

Total Monthly Income Taxes : $790

Net Monthly Income (Total Income - Taxes): ($6,449 - $790) = $5,659

Property Taxes & Mortgage ($964 + $1,200) = $2,164

Monthly Mortgage & Property Tax Payment as a Percent of Monthly Net Income: ($2,164/$5,659) = 38.24%

According to financial experts the maximum recommended after-tax expenditure on housing should be no more than 33%, in Mt. Lebanon we will be a full 5% over that recommendation.

I'm not sure how this is going to end, but something has got to give. Either the tax-payers are no longer going to be able to live in their communities, or the "guaranteed" pensions may not be so "guaranteed" if the state is forced into a pre-packaged bankruptcy (politely called a restructuring). 

I'm so happy that my oldest daughter wants to become a teacher ... she'll be my retirement plan!

Link to PSERS presentation HB 2497 And The Pension Rate Spike:

http://www.scribd.com/full/32938872?access_key=key-1ryfppnbhdm4xehcf5hr

Be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

    

Rumble In The Jungle

He could "float like a butterfly, sting like a bee." He became one of the best known Americans around the globe. He was Cassius Clay. He was the Louisville Lip. He is the Greatest of all Time. He is Muhammad Ali.

As a boxer, he's among the best who ever slipped on the gloves. He won the gold medal in the 1960 Olympics, held the Heavyweight Title three times, and finished with a record of 56-5. And because he mattered boxing mattered, when he fought the whole world stopped to watch.

By 1974 he had been fighting for 16 years, and at age 32 he was a fading king of boxing. But his promoter, Don King, managed to raise a $10 million purse (from the brutal dictator Joseph Mobutu of Zaire) to be split equally between Ali and the reigning heavyweight champion of the world George Foreman.  One more fight -- The Rumble In The Jungle. 

Ali was a major underdog, as many commentators felt he was at the end of the road. Foreman was bigger, younger, and stronger. He had never lost, and had knocked out 37 of his 40 opponents. His last eight fights had all ended in less than six minutes, and he destroyed both Joe Frazier and Ken Norton, the two men who had beaten Ali.

Ali and Foreman couldn't have been more different. Ali embraced the people of Zaire, and they embraced him chanting "Ali Boma Ye" which translated into "Ali Kill Him." Foreman was surly and uncommunicative and quickly lost the PR battle. Ali claimed that Foreman fought like a Mummy and that he would dance circles around him. 

The weather for the fight was oppressive, the heat and humidity stretched the ropes around the ring and made the mat feel like a sponge. Ali's camp worried that he wouldn't be able to dance in such conditions. The fighters entered the ring at 4:00AM, to allow satellite feeds in the US to be shown prime time.

At the opening bell Ali attacked Foreman with a quick flurry of punches, but then Foreman connected with a couple of his own sending Ali into the ropes where Foreman continued to punch him. Between rounds one and two Ali lead the crowds in chants of "Ali Boma Ye!" He spent the entire second round leaning on the ropes, which by now were very slack. Ali slumped back into the ropes to ride Foreman's punches, absorbing a lot of them on his arms and gloves. Ali's manager, Angelo Dundee, was unaware of Ali's plan and urged his fighter to start dancing. Ali ignored him, and in the third round returned to the ropes to be abused by Foreman.

 

Whether Ali devised his rope-a-dope strategy prior to entering the ring, or whether it came to him shortly after getting hit hard in the first round, we may never really know. Somewhere along the road Ali sensed or knew he was facing a "Paradigm Shift". He was up against a superior opponent and that ultimate opponent, age. His old strategy of floating and stinging wasn't going to work any longer, he had to adapt and adapt quickly. 

The crowd was restless watching Ali clearly getting beat. As Foreman continued to pummel him, Ali began to taunt him "Is that all you got George? You disappoint me. My Grandma punches harder than you do...you supposed to be bad..." After two more rounds Ali's strategy was becoming clearer. In the hot, humid night, Foreman was sucking at the heavy air. Ali continued to taunt him and Foreman kept coming. Foreman slumped on his stool after the bell, he had not fought for more than six minutes in a very long time. In contrast, Ali hardly bothered to sit down.

In rounds six and seven Ali continued to absorb punches, but then opened up his gloves and said, "George, now it's my turn," and unleashed a flurry of stinging shots. Foreman's swings became desperate, and in the eighth round he lunged at Ali and staggered forward with the momentum of his punch. Ali sprang from the ropes, landing two beautifully timed straight right hands, a concussive left hook and a last perfect right hand. Foreman flapped at him and then fell in a slow pirouette. As the count reached 10 Foreman could only half stand and the fight was over.

The rope-a-dope was such an audacious strategy; some would say desperate, others genius, but what really mattered was that it worked. I was an impressional 14 year-old when I saw this fight and boy did it leave an impression. I like to think that one of the main reasons so many have loved Ali was because he was a winner. He could find a way to win, he could adapt. He gave us hope, that in the face of insurmountable odds, you have the power to change, to adapt, to win. This is one of the reasons I don't just sell everything, move to the country, buy gold, guns, barbed wire, and canned goods. Deep down inside me I believe that we can figure a  way out. We have a very adaptive society, and a great survival instinct, but sometimes we need to be pushed to the brink before we figure it all out. 

It may be happening now. Many American's feel that the government is spending/spinning out of control and they've had enough. Some have joined the Tea Party movement (taxed enough already), while others are just letting their elected officials know that their days of public service are numbered. And those wily ole politicians (the ultimate adapters) are starting to sense the "paradigm shift". Last Saturday President Obama pleaded with congressional leaders to quickly approve nearly $50 billion in emergency aid to state and local governments, saying the money is needed to avoid "massive layoffs of teachers, police, and firefighters" and to support the still-fragile economic recovery. His appeal is aimed primarily at members of his own party, where there seems to be "spending fatigue" (and reelection fear). While the President wants urgent action, the Democrats don't have the votes and have asked for at least another week. We'll see.

Yes, the 53% of American's that pay taxes are tired of playing rope-a-dope. Tired of getting hit again, and again for more $$. Tired of getting 0% on the little they can save. But while they may be tired, they are not dead. They are finally ready to bounce off of those ropes and inflict a few jabs of their own. Yes, I like to think that this battle is just beginning, and while we may no longer be able to "float like a butterfly" we can adapt, and find a way to win.   

Please watch the attached video, it will take you back:

Boxing Tribute - Rumble in the jungle - Foreman vs Ali

For more on Ali, check out "King of the World: Muhammad Ali and the Rise of an American Hero" by David Remnick.

Be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

    

They Tried To Make Me Go To Rehab

"They tried to make me go to rehab

I said no, no, no.

Yes I been black, but when I come back

You won't know, know, know."

"Rehab" by Amy Winehouse

Amy Winehouse - Rehab

Black Swan Author Emerges from Self Imposed Exile

Nassim Taleb has an amazingly large ego, but he is also brilliant. Late last year he put himself into a self-imposed exile over his disgust of the reappointment of Ben Bernanke. Here is his exit letter:

 "What I am seeing and hearing on the news -- the reappointment of Bernanke -- is too hard for me to bear. I cannot believe that we, in the 21st century, can accept living in such a society. I am not blaming Bernanke (he doesn't even know he doesn't understand how things work or that the tools he uses are not empirical); it is the Senators appointing him who are totally irresponsible -- as if we promoted every doctor who committed malpractice. The world has never, never been as fragile. Economics make homeopath and alternative healers look empirical and scientific.

No news, no press, no Davos, no suit-and-tie fraudsters, no fools. I need to withdraw as immediately as possible into the Platonic tranquility of my library, work on my next book, find solace in science and philosophy, and mull the next step. I will also structure trades with my Universa friends to bet on the next mistake by Bernanke, Summers, and Geithner. I will only (briefly) emerge from my hiatus when the publishers force me to do so upon the publication of the paperback edition of The Black Swan."

Fortunately for us, people with huge egos can't remain exiled for long, (they've got books to sell), so Nassim is back!

Check out his two part interview on CNBC Europe:

Debt Slashing Only Solution: Black Swan Author

Bank Balance Sheets Still Bad: Black Swan Author

Nassim believes, as do I, that we all need to go to debt rehab. We're starting with the Greeks, and several other European countries, but we're not quite there yet in the US. Now no one wants to go to rehab, it's painful, unpleasant, and boring, but necessary if you are to survive. I think we're still years away from any self-imposed rehab here in the States, I just don't see the intestinal fortitude needed in Washington, but eventually Mr. Bond Market will intervene. "He's tried to make me go to rehab, I won't go, go, go."

Well, who are you? (Who are you? Who, who, who, who?)
I really wanna know (Who are you? Who, who, who, who?)
Tell me, who are you? (Who are you? Who, who, who, who?)
'Cause I really wanna know (Who are you? Who, who, who, who?) 

"Who Are You" by The Who

The Who-Who Are You@Concert For New York City 1/4

Hundreds of people get my weekly emails, and many forward them on to friends and associates. While this is great, and I really appreciate the fact that some of you find my work interesting enough to forward. I've found that some people don't know who I am, or why I write. "Who are you?"

I got the question again this week, "What exactly do you do, are you like a financial planner or a broker?" 

I know many people find our industry to be very confusing, not only from an investment perspective, but also from an advice perspective.

I've been a professional money manager for over 25 years, and I've seen my share of the good, the bad, and the ugly sides of our business. My purpose now is to manage my families money, along with the assets of my clients/partners; while helping enlighten as many interested investors as I can.  

So, for those of you interested in what I do all day, here is a quick summary.

My Job: What I Do. Why I Do What I Do. How I Do What I Do.

* My job (really my purpose) is to manage my families money along with the assets of my clients/partners. Every client portfolio is nearly identical to mine...if its good enough for me...

* My goal is to preserve and increase the purchasing power of my (and my partners) investment capital.

* I write because I've always found it helps me clarify my thoughts. I share it with my clients and others because I believe in transparency and education.

* Rockhaven is an Investment Management firm, not an Asset Gathering firm. 

* I am a CFA (Chartered Financial Analyst). Asset Manager Code of Professional Conduct

* I am paid an annual percentage fee of assets under management. I do not receive commissions nor do I receive any other forms of compensation from investment product providers or financial institutions. I believe that some things are just not for sale.

* I spend an inordinate amount of time observing the markets, similar to a scientist observing an experiment. In this case it is a social experiment, entitled "capital markets." My goal in observing the markets is to be in harmony with the markets. 

* Most of what I do is risk management through Global Tactical Asset Allocation (GTAA). GTAA is an investment strategy that attempts to exploit short-term market inefficiencies and manage risk by allocating assets amongst numerous non-correlated markets, and constantly rebalancing into those areas that are working and away from those that aren't. 

* Yes, I use charts. Charts are factual observations that convey the current and historical state of the market. What's most intriguing is seeing relationships change. When markets start to price things differently. This is when risks and opportunities are at their greatest.

If you're curious to learn more please check out our website at www.rockhavencapital.com or drop me a note.

 So, What Are The Markets Telling Us?

Today's disruptions in the financial markets are not your garden variety market fluctuations caused by a slow-down in corporate growth. It is not cyclical, it is secular and structural. It is an overdue recognition that the global economy faces an uncertain future that involves slower growth, and greater government regulation. Structural problems require structural solutions. Unfortunately, most of the worlds political systems are set up for short-term fixes, not long-term structural solutions. That is why you frequently see weekend emergency meetings, where the fall-back solution continues to be ... "throw more money at it."

Investment Considerations:

Where do we stand?

US Equities -- Neutral, but moving towards Bearish

Int'l Equities -- Bearish for EAFE and Neutral for emerging markets

US REITs -- Bullish

Int'l REITs -- Bearish

Gold -- Bullish

Commodities -- Bearish

US Fixed Income -- Bullish

Int'l Fixed Income -- Bearish

Cash -- Increases to 31.5%. 

Last Friday my darling wife decided that I needed to get reacquainted with whats really important, so we opened a good bottle of red, and watched "A Good Year". Excellent movie about a greedy bastard banker who finds his soul. Highly recommended.

A Good Year - Trailer

Be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.

    

Gloom, Boom, & Doom

I've been a fan and follower of Marc Faber's for well over a decade, and this is simply one of the best presentations he has ever given.

Marc Faber is frequently referred to as Dr. Doom, but while he is very bearish on our Keynesian monetary philosophy, that doesn't preclude him from always looking for places to make money.

He believes that the Federal Reserve will never again have a tight monetary policy, they will print & print & print. They cannot afford a debt deflation in a credit addicted economy.

Interest rates may not stay at zero, but they will be below inflation, so you will always have a negative real return.

He stresses the need to have a very flexible asset allocation policy. As he puts it, "How is the world going to look in 3 - 5 years...we don't know, but we do know it is going to be a roller coaster ride."

Now, I don't agree with everything Marc presents, but I do believe in many of his central premises. Bubbles will emerge and pop, the timing is uncertain, but the need for vigilance is paramount. 

While this video is over an hour long, it has had over 77,000 views and the average rating is 4.99 out of 5.

Please pour yourself a big cup of strong coffee, watch this, take notes, and share it.

Enjoy,

Mirror, Mirror on the Wall, When is the Next AIG to Fall? ...

Be careful out there,

Chris Wiles

www.rockhavencapital.com

This article contains the current opinions of the author but not necessarily those of the Rockhaven Capital Management.  The author’s opinions are subject to change without notice. This article is distributed for informational purposes only. Forecasts, estimates, and certain information contained herein are based upon proprietary research and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.