World-Class Stock Market Performance Does Not Happen by Chance

Published: Fri, 07/06/12

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Young Investments Client Letter: Sign up to get the letter mailed directly to you by clicking here.
May Client Letter: Do You Have a Greek Exit Plan?
If Greece is pushed out of the euro, expect more volatility. The magnitude of the damage from a Greek exit will depend on the policy response.—
Read more in the May Client Letter on Younginvestments.com.
 
 
  
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Obamacare Breaking News
 

We’re not done yet, not by a long shot! My friends at Cato Institute explain for you that there is one executive order that could effectively block Obamacare, and this block lies within a president’s powers. As Cato’s Michael F. Cannon explains, Obamacare authorizes tax credits and outlays in an Exchange established by states. Without premium assistance, theoretically, Obamacare would collapse in states that do no create their own Exchanges. Congress, according to Mr. Cannon, has the power to create new tax credits and outlays. The executive branch does not have this power. If the IRS rule offers premium assistance in federal Exchanges, it will clearly exceed the authority that Congress and the Constitution have delegated to the executive branch.

As Cannon shows, an executive order from the next president directing the IRS either to not offer premium assistance in federal Exchanges or to rescind this rule and draft a new one could work. In the end, Obamacare would not be repealed, but a lot of Obamacare spending would cease, resulting in Congress reopening the law.

In my home state(Debbie and I live in Key West), governor Rick Scott is leading the charge against implementation of Obamacare. Florida will not begin implementing Obamacare because it is bad policy and too costly. Florida will not set up a health-insurance Exchange or participate in an expansion of Medicaid. Governor Scott believes a new president should repeal Obamacare. Alaska’s Governor Sean Parnell has previously announced that Alaska will implement no part of Obamacare. Texas Governor Rick Perry calls Obamacare a “stomach punch to the American economy.” Perry maintains, “Obamacare is bad for the economy, bad for health care, bad for freedom…. The Supreme Court failed to uphold Constitutional limits placed on Washington.” FreedomWorks has released a battle plan: “How the Grassroots Can Stop Obamacare in the Senate.” Targeting weak Senate candidates is a focal point for Dick Armey and FreedomWorks.

So, all is not lost, but we all have a lot of work to do. For my part, I will stay in close contact with Cato and post for you Cato’s best thinking. I will also stay in touch with statehouse offices of key governors, like Rick Scott, whom I have met and like. Rick Scott can make things happen. He is a take-no-prisoners kind of guy and a powerful and relentless worker for small government, states rights, and freedom. Rick is a regular at Cato events and extraordinarily popular.

I wish each of you a great July 4th honoring the birthday of America and the date of the adoption of the Declaration of Independence in 1776. Here at home, my big yellow Don’t Tread On Me flag is flying alongside my 13-star American flag honoring America’s original states. Make it a great 4th.

Warm regards,

Dick

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Why Romney Will Win
 

Romney-2012You would think that last Thursday, the day Obamacare was made legal by Chief Justice John Roberts, would be a day best spent in bed with the shades pulled down. But as it turns out, it was one of the most inspirational days of my life. I had the great honor of attending a private dinner at a Newport estate for special guests Reince Priebus, Chairman of the Republican National Committee, and Tagg Romney, the eldest son of governor and presidential hopeful Mitt Romney. It was a special evening beyond any of my expectations.

To properly set the table for you, Newport, Rhode Island, is a gem of a city by the sea. But it sparkles brightest in the summer, and this night even more so. The weather was beautiful, and there was the buzz of the America’s Cup World Series AC 45s racing off of Castle Hill and Fort Adams earlier in the day, along with the anticipation of the night’s speakers and what they’d say after Obamacare was deemed the law of the land.

Before we were seated, I met with former Rhode Island gubernatorial candidate John Robitaille, who had invited me to the event, and who but for 2% of the votes would be Rhode Island’s current governor. What he said in our meeting hit the nail on the head. Thursday’s ruling is only going to help Governor Romney in November, because the measure was always sold by the president as not being a tax. And that’s exactly what it is.

Robitaille said team Romney is fired up. He said he’s in touch with the Romney campaign at least twice a day and told me how enthusiastic he is about their organization and the work that’s going on behind the scenes. Professionalism would be a good description.

I chatted with former Rhode Island Governor Donald Carcieri before he went on to give a heartfelt introduction. He said this is the most important election of his adult life. He talked about his friendship and respect for Governor Mitt Romney, which goes back to the days when they were both governors. And then he turned the stage over to Chairman Reince Priebus.

Reince said you get a name like his when a German and a Greek get married. But not to worry—his kids have normal names. He talked about growing up in a Greek family, saying that it was just like the movie My Big Fat Greek Wedding. Looking at his phone, he said that his mother could be calling him right now.

Reince talked about growing up and how much he loved his grandfather or papous (pah-POOH) in Greek. He said he doesn’t know what it is about grandsons loving their grandfathers so much, but as a kid he would follow his papous everywhere. And because they spent months at a time together in Greece or America, they were very close.

Papous’s favorite thing to do would be to look over the Encyclopedia Britannica, take out the book with the letter “P” on the binding, and read to Reince about the presidents of the United States. He would tell Reince stories about every single president—“Some true,” said Reince, “and maybe some not so true, but they were great stories.” He said Papous did it because he loved America and what America stood for.

Reince commented on the current situation in Greece. He said it’s what happens when the “takers” of society take over a country. He said when you’re a taker, you become irrational. Right now, Greece is a country of irrational takers.

Rational conservative principles can take you a long way in this country. Reince said it takes time, though, and a real grassroots effort. He said he and Gov. Scott Walker of Wisconsin, his best friend, got started at least 10 years ago when Scott was a Milwaukee County executive. He said the reason Scott Walker is a success is that Americans at their core are conservative. He said their grassroots effort staked everything on Scott. And their winning formula for every candidate they helped and are helping is simple. First, you need to believe in conservative principles; second, you need to run on them; third, and most importantly, you need to govern by them.

With Reince at the helm, I expect a lot of good things in the future for the Republican National Committee. He understands that the Tea Party is not on board with your father’s Republican Party. He knows that you get Americans together not by asking “Are you in the Republican Party or the Democratic Party?” but rather “Are you concerned about your kids’ or your grandkids’ future?” For a lot of us, that’s a big yes.

I had the great pleasure of speaking with Reince after his speech. I told him I was the guy on the Helen Glover Show at 920WHJJ right before his segment with Helen that day. On the show, he said that coming to Rhode Island will mean he’s been to all 50 states. Based on the enthusiasm he generated at the dinner, I think there will be plenty of reasons for him to return to the Ocean State real soon.

Like Reince, another not-so-common name is Taggart. The eldest Romney son opened his talk by saying that it’s usually the fifth or sixth child that parents go out on a limb with on the wild and crazy name thing. But he said his parents did the opposite, naming him after a friend of his father, and then going with Matt, Josh, Ben, and Craig for his younger brothers.

Tagg Romney said he didn’t want to get into campaign tactics that night; rather, he thought it would be good to share some stories from the perspective of a son. He talked about how he helped his dad stock the shelves the night before the big opening of the first Staples store. He talked about how his dad didn’t initially want to leave Massachusetts to help solve the $400-million Olympic deficit, but his mom told him he needed to do it if he felt he could help.

He also talked about a little red rowboat. The Romneys had a small two-bedroom cottage in Pocasett, Massachussetts, which is about a two-hour sail across Buzzards Bay from Mattapoisett, where I grew up, and right at the beginning of the Cape. One afternoon, Tagg took the red rowboat out to go fishing. His parents had guests visiting, so he wanted to impress them by bringing home some fresh fish for dinner. Once he was far enough out, he dropped the anchor and began fishing. After a while, he had caught some fish and was ready to go home. He then realized how far he was offshore and noticed his anchor line was missing. It was never tied to the bow cleat.

When he finally reached shore, he walked up to the house, showed everyone what he had caught, and under his breath told his Dad, “I lost the anchor.” As he walked away, his dad said, “You lost the anchor? Well, where is it?” Pointing out to the bay, Tagg said, “Out there somewhere.” He continued to walk away, and rather than drop the subject and get back to his guests, his dad said, “Well you need to find the anchor.” Tagg said he knew this was another argument he was going to lose, so he walked down to the boat.

As Tagg and his dad rowed out, his father explained to him how to use points on land, create a grid, and do a search. Forty minutes later, they found the anchor. Tagg told us he learned two important things that night about his dad. One, that he is the cheapest guy he knows. The anchor maybe cost $1.50. And two, that his dad truly believes that if you focus your mind on a problem and then work and work and work, you can solve that problem.

Tagg happened to sit next to me for dinner. I told him how much I enjoyed hearing his story. We were both heading home to our families afterwards. When I was driving home, all I could think about was how truly memorable this summer night in Newport was and how some frugality and hard work is a change I can believe in

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Happy Birthday America!
 



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NAVSOP: Navigation via Signals of Opportunity
 

NAVSOPGreat Baddow, United Kingdom; BAE Systems has unveiled its latest research on an advanced positioning system that exploits existing transmissions such as Wi-Fi, TV, radio and mobile phone signals, to calculate the user’s location to within a few metres.

Military platforms commonly use Global Positioning Systems (GPS) to find their position and navigate. GPS rely upon a specific and relatively weak satellite signal that is vulnerable to disruption. Known as Navigation via Signals of Opportunity (NAVSOP), BAE Systems’ new system is able to calculate its position by making use of the hundreds of different signals that are all around us.

By exploiting such a wide range of signals, NAVSOP is resistant to hostile interference such as jamming (a particular weakness of GPS) and spoofing, where a bogus signal tricks a device into misidentifying its location. The new system can learn from signals that are initially unidentified to build an ever more accurate and reliable fix on its location. Even the signals from GPS jammers can be exploited by the device to aid navigation under certain conditions.

The real beauty of NAVSOP is that the infrastructure required to make it work is already in place. There is no need to build costly networks of transmitters and the hardware behind the system is already commercially available. Another benefit is that it can be integrated into existing positioning devices to provide superior performance to GPS.

A major advantage of the system is its ability to function in places where GPS is unable to reach, such as dense urban areas and deep inside buildings. It is also able to work in the most remote parts of the world, such as the Arctic, by picking up signals that include Low-Earth-Orbit satellites and other civilian signals.

From aiding soldiers operating in remote or dense urban areas to providing improved security for Unmanned Aerial Vehicles (UAVs), which could face attempts to disrupt their guidance systems, NAVSOP has a wide range of potential military applications.

Among those pioneering this area of research is Dr Ramsey Faragher, a Principal Scientist from BAE Systems Advanced Technology Centre, who recently led a team that received a prestigious award from the Institute of Navigation 1 for a ground-breaking paper on how aspects of the technology work indoors.

Dr Faragher said: “The potential applications of this technology are already generating huge excitement in both civilian and military circles. This research is a great example of BAE Systems working closely with potential customers to not only improve the performance of existing technology, but also tackle their weaknesses head on and find innovative ways to reduce or eliminate them.”

James Baker, Managing Director at BAE Systems Advanced Technology Centre, said: “At a time when the need to be innovative and resourceful is more important than ever, this capability represents truly outside-the-box thinking by providing a cost effective system with a wide variety of different applications. This technology is a real game changer when it comes to navigation, which builds upon the rich heritage that both BAE Systems and the UK have in radio engineering.”

This research is generating interest in both defence and civilian domains where its uses could include helping fire and rescue services find their way through smoke filled buildings and enhancing the safety of lone workers and security staff.

Source: BAE Systems

For more information on the reliance and vulnerabilities of Global Navigation Space Systems read the Royal Academy of Engineering Report, www.raeng.org.uk/gnss.

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World-Class Stock Market Performance Does Not Happen by Chance
 

Here is a great story. Back in 2003, I launched Young Research’s Retirement Compounders to form the basis of a new portfolio service for our clients at Richard C. Young & Co., LTD. The new stock portfolio service was based on my long-held view that dividends and compound interest could work to achieve consistent returns in all kinds of weather. We now have eight full years of returns in the books. Here is how things stand.

The Morningstar database lists data on 4,500 diversified stock funds with returns from 2004 forward. Only two funds in each of the last eight years have earned more than the S&P 500. (That’s two out of 4,500.) Young Research’s Retirement Compounders, although not a fund, has achieved the same record. When I kicked off the RCs in 2003, I never dared hope to achieve such success. But I am pleased with the results, as are clients of our management company, for whom the RCs were originally started.

The American economy is burdened today by historically high deficits and debt. The Fed, which I would abolish, continues a charade of artificially low interest rates, which allows Wall Street speculators to borrow at virtually nothing, while America’s hard working savers earn nothing in savings accounts. We need new leadership in Washington that will allow America’s small business owners to re-start the jobs creation engine. A national Right To Work law must to be passed. Until our ship of state is righted, the environment for stocks and bonds is going to remain bleak. In today’s environment, a portfolio of high-yielding blue-chip stocks offers investors an ideal shelter, and the Retirement Compounders have proven to be just the ticket.  To learn more click here.

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