I Am Leaving the U.S

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I Am Leaving the U.S April 11, 2014 Password for the STANDARD Newsletter Archive is: PCAPP I AM LEAVING THE U.S. I went on a six day working vacation this past week to La Paz, Mexico. Guess whose boat was at the fuel dock down there? The answer in a minute. While there I overheard some Gringo’s talking about how they were fed up with the corporate life back in the states. He worked for Cisco, and she was a real estate agent in the Southern California area. They had plans for eventually leaving the U.S. behind and moving to Mexico permanently. 1 I have been going to Mexico since I was eight years old. I was fortunate to have a father who had the spirit of adventure, and a mother that was happy to tag along. We crossed the border almost every other Saturday to watch the horses run at Agua Caliente racetrack in Tijuana. My good mother would also make sure that I went to church the next day. Back then, I was busy inventing a system that would predict the final time that a horse would run. It was quite a formula. I was in my mid-teens at the time. I have been a number cruncher my entire life. Finally at the age of 19, I hit the pick six at Caliente. I had six straight winners using my system and I left the track with bundles of fifty dollar bills. I believe it added up to about $26,000 overall for a $16 bet. Caliente closed a few years later, but it sure left me with some good memories. I really looked forward to those Saturday trips with Mom and Dad. Tijuana had some of the best restaurants that I have ever eaten at. The original Caesar Salad was invented by Caesar Cardini at the Caesar Hotel restaurant on Revolucion in downtown T.J. Caesar Cardini-The Culinary Genius behind the Caesar Salad! I have one almost every day. 2 I will probably be chased down my mobsters from south of the border, but here it is, the original recipe! I just ate the card that this was typed on. I cannot disclose how I got it, but I have committed it to memory. I prefer olive oil as opposed to salad oil. I put about ten crushed cloves of garlic into a good virgin olive oil, and always have it ready to pour into my big wooden Caesar Salad bowl at home. We also went on a big family vacation every year, usually to Mexico. We were going to Cabo San Lucas back when it was a sleepy fishing village. Now it is basically San Diego South. We saw the iguanas in Puerto Vallarta, and the Mayan ruins in Cancun. I caught my first sailfish in Mazatlan and had it hanging on the wall of my room all through high school. It would watch me do my homework every night. Poor thing. And while I have an affinity for Mexico, I am always glad to get back home to a lot of the conveniences that Mexico still lacks. It can be a great place to visit from time to time, however. What does this have to do with investing? It has a lot to do with investing in 2014. In fact it is the overriding them in this week’s newsletter. But first the answer to the quiz above: Whose boat is that being fueled up in La Paz, Mexico? Answer: This is the boat that Steve Jobs had built while he was still alive. I believe that his family still owns it. It was built to resemble an iPhone. It is one of the strangest boats that I have ever seen, but at the same time it is quite striking. My reason for traveling to La Paz was to make all of the arrangements down there to park my boat for the upcoming fishing season. I hired a captain in San Diego to drive my old fishing boat some 1200 miles down to La Paz. 3 Along the way, he encountered 13 foot seas and 50 knot winds down around Magdalena Bay. I did not think that the old boat had it in her, but she made it in one piece. When I met him down there, he asked me if I was glad that I did not travel with him. I told him that I had been dealing with 13 foot seas and 50 knot winds back in the mainland. They were piling up in Nasdaq bay and Point Internet. Luckily I saw them coming, but I still got caught in some of the lead up to the storm that was to hit later. By the way, my old fishing boat is the one on the left, not the one on the right. When I grow up I want to be just like Steve Job’s Venus. I would sure hate to pay his fuel bill, however. But then I guess that he can afford it. The reason I bring up Mexico, is because the action in the market is LEAVING the U.S. and heading beyond our borders. This is a major transition that is taking place after a 2-3 year hiatus for the foreign markets. This flow of cash overseas will show up vividly in some screenshots from the app a little bit later in the newsletter. Lets first look at the 13 foot seas and 50 knot winds that continue to hammer certain areas of the U. S. markets. 4 It is estimated that there are over one million cargo containers floating just underneath the surface of the oceans of the world. Every once in a while the market finds a few of them. The biotech index is now down 20% from its late February high. It has finally landed on its 200 day moving average, however. But there are no guarantees that it will stop there. 5 The Internet Index is now down 16.2% from its early March high. It has now broke BELOW its 200 day moving average. And the Social Media sector is down 22.4% from its early March high. It too has broken below its 200 day moving average-YELP!!!!! When people tell me that the market is barely down this year, I have to point out the sea containers like these that are lying just underneath the surface. If you own an index fund, you still have not hit any. But how did an index fund do in the 2007-2008 BEAR MARKET? They were down 50%. It your choice, passive investing vs. active investing. Neither one of them will remove the pain that comes with the market from time to time. The market has now gone from 666 to over 1800. But, along the way there have been MANY bouts of pain. The amateur sells and goes to cash. The wise investor endures a little pain, picks himself up, dusts himself off, and follows the money flow. How many times has Warren Buffett gone to cash during his investment lifetime? I have many clients that are going through their first bout of pain since they have been with me. They are finding out whether or not they really have an aggressive growth risk tolerance or not. Aggressive growth offers greater rewards over time, but also comes with more volatility. That is why I say that you have to have at least a five year time horizon. 6 Only a few have decided to cry uncle completely. A few more have moved from an aggressive profile to a conservative profile. No problem. And a handful have called me up and read me “the riot act” to me. It is OK, I can take it. Unfortunately these are usually the investors that panic and change what they are doing EVERY TIME a correction in the market comes along. I call this, “shooting yourself in the foot.” Over time, they have little to show for their efforts. As for me, I have EXTREME confidence in my abilities to manage money, but you have to be comfortable with that person that you have trusted your funds with, however. In addition to this, NO money manager can remove all of the pain that comes with investing in the market. The market is going to catch a cold from time to time. There is going to be a little discomfort. The best medicine for market pain is knowing you have someone who is on top of your holdings each and every day. Having someone who is pro-active, and making big changes when the market makes big changes. Having someone who is not stuck in any ONE style of investing. Almost overnight the market has gone from a U.S. based go-go growth market to a Global based slow-slow value market. It is still my observation that the money that is gushing out of last year’s leaders is NOT leaving the markets. Instead, it is flowing to other areas of the market that have been left WAY BEHIND over the last few years. I am not the only investor who believes this. Listen to my interview from Thursday’s show with Global Guru Nicholas Vardy. Previously beleaguered Brazil is suddenly catching fire. It is up 25% during the same period of time that the U.S. leaders have been getting pummeled. You will notice a lot of Brazil showing up in my model portfolios. It has been about a three year absence. 7 Australia is breaking out.
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