Drama Is A Drain

Right on schedule even more party loyalists are quiting vs. running for reelection this autumn. Expect the contagion to accelerate...the media can no longer hide the truth..the math is speaking for itself now....Americans do not want to leave a broken country to their children.

The "drama is a drain" (said the sportscaster) is a concept to all elite athletes....but has many applications in life.

We are constantly asked, "what do we do here...what do we buy?"

We answer, it has to pass the margarita test. One has to be able to sit at the beach, have a margarita and not worry about the investments in ones portfolio.....if the public markets closed for what ever reason.....the companies go on and on, paying dividends and growing market share. Qualifications for these investments would include many of the following criteria: 1) Pay a sustainable dividend..in today's market that would be be a yield around 3 to 5%. 2) Be valued at 4 times EBITDA or "cash flow". 3) Be in an industry leadership position. 4) Be over capitalized with a very strong balance sheet...self funding with no need to raise money. 5) Do business globally. 6) Superior proven deep management with stock ownership. 7) The price to earnings ratio should be about half the current market valuation. 8) The government is not in the same business.

THERE ARE MANY STOCKS THAT FIT THIS CRITERIA TODAY.

Wdc, llc last week sold $16 billion of 30 year bonds at a yield of 4.720%..the highest since Aug. 9, 2007. So anybody who has bought bonds since then is now under water (losing money). Forbes pointed out in a column last week, "U.S. equity funds lost $35 billion in 2009, versus $421 billion going into bond funds. There's a lot of money in bonds now that could flee at the first sign of trouble."

We agree!

China will raise salaries (income) and revalue it's currencies soon...they will start to export inflation vs. the past exporting deflation. Remember the only way out of this debt mess is to inflate....gold and oil will be our proxy...look for both to trade higher shortly....every central banker on the planet wants inflation now...they just can't tell you that.....

Bonds get killed from here.

Danny Boy seen here cooling off.