My grandfather was an immigrant from Sicily who joined the army during WWI to attain US citizenship, lost an eye when he was mustard gassed on the Western Front, and settled down in the Bay Ridge section of Brooklyn after the war.
He bought a three bedroom brick home on 76th street for $3,000, eventually raising four kids. Back then, there was a dairy farm across the street, and horse drawn wagons delivered ice blocks door to door. During the roaring twenties an assortment of relatives chided him for avoiding the stock boom where easy fortunes were made trading on margin. When the 1929 crash came, all of them lost their homes. Grandpa finished off the basement, creating space for two entire families to move in. He never bought a stock in his entire life.
Because dad contracted malaria with the Marines on Guadalcanal during WWII, the old man moved the family to Los Angeles in 1947 for the dry, sunny weather. Unfortunately, the train stopped long enough in Las Vegas for a flim flam man to sell him five acres of land for $500. Ten years later my dad drove out to check out the investment. It was a tumbleweed blown, jack rabbit and rattlesnake ridden piece of land so far out of town that it was worthless. You couldn?t see downtown, even if you stood on the rusted out model ?T? that occupied the land. After that, the parcel became the family joke, and grandpa was ridiculed as the world?s worst investor.
Grandpa died of emphysema in 1977 at the age of 78. Chateau Thierry and Belleau Wood finally caught up with him. What German shrapnel and gas failed to accomplish, 60 years of smoking two packs a day of Marlboro?s did. His estate executor put the long despised plot in Sin City up for sale. Although the final price was never disclosed, it was thought to be well into eight figures. In the intervening 30 years the city of Las Vegas had marched steadily Southward towards Los Angeles, eventually encompassing it, sending its value through the roof. The deal triggered a big fight among the heirs, those claiming he was the stupidest demanding the greatest share of the proceeds, the bad blood generated continuing to this day. It turns out the world?s worst investor was really the best, we just didn?t know it.
What was the address of this fabled piece of real estate? Why, it is 3325 Las Vegas Blvd. South, the site today of the Venetian and Palazzo Hotels, home to the Dal Toro restaurant, the venue for the Mad Hedge Fund Trader?s last Las Vegas strategy luncheon. I?m sure grandpa is laughing in his grave.
Bought for $500 in 1947
One day in New York a few years ago, I had a few hours to spare waiting to board Cunard?s Queen Mary 2 to sail for Southampton. So I decided to check out the Bay Ridge address near the Verrazano Bridge where my father grew up that I had heard so much about during my childhood. I took a limo over to Brooklyn and knocked on the front door. I told the owner about my family history with the property, but I could see from the expression on his face that he didn?t believe a single word.
Then I told him about the relatives moving into the basement during the Great Depression. He immediately let me in and gave me a tour of the house. He told me that he had just purchased the home and had extensively refurbished it. When they tore out the walls in the basement he discovered that the insulation was composed of crumpled up newspapers from the 1930?s, so he knew I was telling the truth. I told him that grandpa would be glad that the house was still in Italian hands. Could I enquire what he had paid for the house that sold in 1923 for $3,000? He said he bought it as a broken down fixer upper for a mere $775,000.
As I passed under the Verrazano Bridge on the Queen Mary II later that day, I contemplated how much smarter grandpa became the older I got. I hope the same is true with my kids.
Queen Mary II Passing Under the Verrazano Bridge
One of the great things about running a website with a truly global reach is that readers send me material which is nothing less than outrageous. So I had to laugh when I found in my inbox an animation of two bears discussing the hopelessly idiotic approach the US government has taken towards its trade with China over the past two decades.
America gave away 25 million jobs, got nothing in return, with the end result that our standard of living is falling, while China?s is rising. The Chinese made this easy by devaluing their currency 50%, thus giving their exporters an unassailable price advantage. This has enabled the Middle Kingdom to buy an increasingly larger part of the US every year at knock down prices.
The US could address this imbalance at anytime through the imposition of punitive import duties and forcing a revaluation of the Chinese Yuan. But any attempts to do so are fought off by well-financed libertarian pro business elements spouting the principals of free trade. So China laughs all the way to the bank, and the unemployment rate here ratchets ever skyward.
To watch this irreverent video in its entirety, please click here for this link, and learn how international trade really works.
Global Trading Dispatch?s Trade Alert Service posted a new all-time high yesterday, clocking a 50.9% return since inception. The 2012 YTD return is now at 10.71%. That takes the average annualized return up to 30.1%, ranking it among the top five performing hedge funds in the world. Those happy subscribers who bought my service on May 23 have seen every one of my 11 trade recommendations turn profitable, reaping a 15.32% gain from my advice.
I really nailed the top of the market on April 2, piling on hefty short positions in the S&P 500 (SPY) and the Russell 2000 (IWM) within a week. Predicting that the conflagration in Europe would get worse, my heavy short in the Euro (FXE), (EUO) was a total home run. I took in opportunistic profits trading the Japanese yen (FXY), (YCS) and the Treasury bond market (TLT) from the short side. I was then able to lock in these profits by covering all of my shorts within 60 seconds of the May 28 market bottom.
In June I caught almost the entire move up with a portfolio packed with ?RISK ON? trades. I picked up Apple (AAPL) at $530 for a rapid $50 gain. I seized the once in a lifetime opportunity to buy JP Morgan (JPM) at a 40% discount to book value, picking up shares at $31, correctly analyzing that the ?London Whale? problem was confined and solvable. My long position in Walt Disney (DIS) performed like the park?s ?Trip to the Moon? ride. While Hewlett Packard (HPQ) fell a disappointing 5% on me, I was able to add 140 basis points to my performance through time decay on an options position.
My satisfaction in all of this comes from the knowledge that thousands of followers are making money in the markets that never would otherwise. I am protecting them from getting ripped off by the sharks on Wall Street with their conflicted and indifferent research. I am expanding their understanding of not just financial markets, but the world at large. And I am doing this during some of the most difficult trading conditions in history.
Earlier this week, I added a short position in the (SPY), expecting that Ben Bernanke would fail to deliver QE3. That assessment proved correct, delivering my 11th consecutive profitable trade. The roster is below:
Global Trading Dispatch, my highly innovative and successful trade-mentoring program, earned a net return for readers of 40.17% in 2011. The service includes my Trade Alert Service, daily newsletter, real-time trading portfolio, an enormous trading idea database, and live biweekly strategy webinars. To subscribe, please go to my website at www.madhedgefundtrader.com, find the ?Global Trading Dispatch? box on the right, and click on the lime green ?SUBSCRIBE NOW? button.
Trade Alert Service Since Inception
My first morning in the Swiss mountain hamlet of Zermatt, home to the Matterhorn, I was awoken by an army platoon outside my door, fully armed with fixed bayonets.
No, I was not being arrested for past indiscretions in the idyllic Alpine paradise. My often-inflammatory opinions had not even triggered an international incident worthy of military action. It was in fact, the traditional religious holiday of Corpus Christie, and the entire town was conducting a parade past my hotel, brass band and all, at 6:00 am.
Was It Something I Said?
Back in town I stopped at the Chamber of Commerce to pick up my 40-year visitor?s loyalty pin. The pin entitles me to free concerts at the 18th century church and other such frills.
When I first arrived here, the town was overrun with American college students, backpacking around Europe on shoestring budgets, using their Eurail passes to sleep on overnight trains to save the cost of a Youth Hostel. Alas, the age has passed, and today they are gone. Even the Youth Hostel here now costs $50 a night.
The weak dollar means that the only young Americans you see are the children of ?the 1%? flaunting new Rolex watches and daddy?s American Express platinum card, acting as obnoxious as they can. The locals love the business.
The Strong Swiss Franc Forced Some Economies
Since the Matterhorn has some mystical hold over the Japanese as the world?s most perfect mountain, tour groups are here en masse. At one traditional Swiss restaurant I saw one very loud, drunken fellow stagger from table to table, annoying every guest.
I knew from hard earned experience that this red-faced guy was going to throw up any minute.? I asked the owner why he didn?t throw him out. He said that the miscreant was the tour guide, if he left, his 20 big spending customers would depart with him, and he couldn?t afford to lose the business.
Can I Make a Collect Call to the 16th Century?
Zermatt has been a transit point for those traveling between Northern and Southern Europe for thousands of years. During WWII refugees fleeing fascist Italy were guided to the edge of the glacier never seen again. Hundreds are still thought to be entombed in the many deep crevasses.
On a previous trip, search and rescue was sent out to retrieve a newly discovered body. After sifting through his pockets and dating the coins, authorities realized that the unfortunate victim had been there for at least 400 years.
I always avoid the cheesy souvenir shops, as most of their offerings are now made in China, and I already have enough Swiss Army knives to last a lifetime. Instead, I do my shopping at the local hardware store and supermarket, loading up on my favorite mustard, chocolate bars, and a few cowbells.
There is a huge construction boom underway in Zermatt, with more than 20 hotels and condo buildings under construction. I asked a local business leader why this was so, with the economy of Europe falling apart. He replied that whatever they were losing with Germans, French, Spanish, and Italians they were more than making up with Asians and Arabs. Many shops now offer their chocolate, cuckoo clocks, and T-shirts with Japanese signboards.
More on Zermatt later.
Place to Think Great Thoughts
Many apologies to the hundreds of listeners who were cut short during the broadcast of my biweekly strategy webinar on Wednesday, August 1. Despite the Herculean efforts of the staff, sometimes the technology doesn?t deliver as promised. This was one of those days.
For a start, getting the GoToMeeting software to work on an iMac is a bit like trying to shove a round peg in a square hole. While the scenery in Zermatt is spectacular, the local broadband is still stuck in the 19th century. I did a speed test and discovered, to my horror, that I was clocking 2 mb/second, compared to the blistering 100 mb/second that I get at home.
The satellite link connecting Europe with the US can go down at any time. On top of that, the London Olympics has been sucking up much of the continent?s bandwidth, slowing down everyone?s communications to the speed of molasses in winter.
There were some local issues that further complicated matters. It is the Swiss National Day, or the country?s equivalent to the Fourth of July. So everyone had the day off, and many spent the day surfing the net, further slowing speeds. Fireworks went off constantly, and the party next door started to spill over into my own chalet.
Right at 6:00 pm local time, the church bells started ringing, just as my webinar was getting started. I hope you were able to hear them in the background. Oh, and I think some local goats were chewing on my fiber optic cable. When the call came in that the audio was intermittent, I had little choice but to can the broadcast.
Please go to my website at www.madhedgefundtrader.com and log in. There you will find the PowerPoint for today?s webinar posted, along with all other past strategy webinars. I look forward to hearing from you again when I return to the 21st century next week and have US grade hardware and communications at hand. I?ll be broadcasting from a PC, so that the live Q&A chat window will be restored as well.
After my failed attempt, I headed to central Zermatt to join in the celebrations. I found the main street packed shoulder to shoulder with at least 10,000 revelers. Traditional Swiss music groups played tunes like Yankee Doodle and The Stars and Stripes Forever. Businesses had tables in front selling every imaginable kind of food. They were slinging out fondue, raclette, something called cholera, bratwurst, flamenkuche, and sushi as fast as they could make it. The beer and wine flowed freely, and people of every nationality were in an ebullient mood. I matched every stop at a food stand with two at the bakery tables. The waste line suffered.
As we approached 10:00 pm, the fireworks increased in crescendo. Then three huge signal fires were set on the surrounding mountain peaks, and the festivities moved into overdrive. They clearly do not have the same restrictions as at home, as every juvenile delinquent had an armload of skyrockets, roman candles, and firecrackers, which they put to use with reckless abandon.
Just as the town began its main display, a huge thundercloud barreled up from Italy. We witnessed an awesome duel, with enormous lightening strikes on the Matterhorn challenged by the immense booming of fireworks over the village. As we were deep in an Alpine valley, the reverberating echoes off of the surrounding mountain walls were superb. Finally, a torrential downpour sent everyone scampering for the cover of the overhanging eves of chalets.
In the meantime, good luck and good trading.
John Thomas
Zermatt, Switzerland
My Morning Commute
Taking the express train from Paris to Frankfurt, I was playing around with the map function on my iPhone 4s. It was really cool watching the blue dot marking my location zip across the map at 200 miles per hour.
When I zoomed in on my location, I realized that I recognized many of the names. Soissons, Chateau, Thierry, and Belleau Wood were all names that I recalled from my grandfather?s US Army discharge papers from WWI. That?s where he suffered a mustard gas attack that inflicted total blindness for 5 years and put him in a bad mood for the next 50. The train was traveling along the frontline trenches of the Western Front.
I wondered what my grandfather would say to me today, 45 years after his passing. His parents sent him from his native Sicily to New York City to avoid the Italian draft, which then needed recruits to expand its empire in Libya and Ethiopia. But when 1917 came, he joined the American army?s famed Rainbow Division to gain US citizenship and quickly found himself in the trenches.
I am sure he would be amazed by the technology that emerged nearly 100 years into the future; bullet trains, cell phones, and laptop computers that give immediate access to all knowledge. He was a true renaissance man, spoke five languages, and was well versed in the classics, so he would have appreciated the utility of such devices.
However, he would have been horrified that I was traveling to Germany to speak with the hated ?Bosch?, who committed atrocities against Belgium children, whose submarines sank unarmed civilian ships, and who were no better than lowly ?Huns?. That, however, is precisely where I was going, to advise the German government, the CEO?s of top corporations, and officials from the Bundesbank on how to extricate themselves from their current financial and political predicaments.
Check Out My Frankfurt Digs
When I arrived at Frankfurt station, my origins as a German blue-collar factory worker made themselves abundantly clear. I headed straight for a fast food stand and ordered a bratwurst mit brutchen und kartofelsalat mit eine grosse bier. When I was 16, I spent a summer working at the Sarotti chocolate factory in West Berlin, and the preferences I picked up live with me today. Some of my co-workers had been Russian POW?s in Siberia released only a few years before, and the stories they told me were bone chilling.
When the list of those who wished to hear my views became impossibly long, I finally said to one friend, ?Why don?t we just get everyone together and have one big party.? And that?s exactly what he did. Crammed into the top floor of one of Frankfurt?s highest skyscrapers were 100 of the cream of the German establishment who came to hear my thoughts on the world at large.
I told them that Europe has two choices: it can move backward or forward. If it returns to the past, the European Community and its currency will break up, forcing each country to compete individually against the US and China. This would cut GDP growth by half and lead to a permanent decline in standards of living. Germany would lose all of its banks as they go under en masse from the burden of bad European debts. Eventually, you would end up with a Germany that is angry, broke, and nuclear, and nobody wants that.
Inventory is Not Flying Off the Shelf in Europe
The only choice, then, is to move forward. Europe is really half a country, or a pretend country. It has a common currency, but not the institutions to ensure its survival, like a US style Treasury Department and a dual mandate central bank with teeth. The present system as it stands is guaranteed to fail. But it took a Herculean effort to get this far 13 years ago, with every party expending their last centime of political capital. So here we stand. After a long hiatus, it is now time to move forward.
It?s up to Germany to bail out the weaker economies of Southern Europe. For a start, they have the money to do so. Much of this was earned exporting German products there. Last year exports exceeded $1 trillion, or about 20% of GDP. Complain all you want about Mediterranean borrowing, but a very large part of it was used to buy Mercedes, Volkswagens, BMW?s, and Audi?s. That?s a lot of money to put at risk by allowing their economies to implode.
Research Can Be So Tedious
But bailouts don?t come free, and the quid pro quo for riding to the rescue would be to give Germany control of European monetary policy. The president of the ECB doesn?t even need to be a German. A Belgian would do, as long as he pursues German style anti-inflationary policies.
There are plenty of historical precedents for such arrangements. The US put up the money for the creation of the United Nations in 1945, and kept for itself a permanent seat on the Security Council. The US funded World Bank is always run by an American. The originally US financed International Monetary Fund has traditionally been managed by a European. The current president is former French Finance minister Christine Lagarde. But its headquarters are in Washington DC.
Pulling this off isn?t going to be easy. When the United States wrenched these concessions out of 13 states in 1787, only 5% of the population was allowed to vote?white, property owning males. Good luck trying to achieve that in a loose confederation of 27 states, with 17 in the monetary union that backs the Euro. Some politicians may have to actually earn their pay for a change. I expect this to be a five-year work out, at the very least.
The net net for all of this is that the Euro will get a lot cheaper before we hear the end of this. Parity against the greenback by next year is within reach, and a revisit to the old low of 88 cents is not impossible. Such a bargain currency would give Europe a huge economic advantage on the world stage and might even provide the grease to make an ultimate solution possible. Then we will have a real United States of Europe to be admired, but also feared as a real competitor.
With that, I headed off to a late dinner near the grand Frankfurt Opera House with several of the more senior guests. My host explained that the impressive baroque building was symbolic in Germany in many ways. While it looks ancient and imposing, it in fact was new, rebuilt with modern reinforced steel and concrete on the rubble of WWII.
Powered by beer, Rhine wine, and ultimately schnapps, I made it until midnight and then caught a taxi back to my palace, wondering if I had missed anything that evening. I also wondered if my grandfather would have been proud of me.
It was an unexpected call. A close friend who ran one of the world?s largest hedge funds said he had two tickets to the London Olympics opening ceremony on Friday night. Would I like to have them? I said he must be kidding.
I knew from my own research that these tickets were the most sought after in the world and were going for $20,000 each on the black market. Forgeries abounded. Besides, I was high in the Swiss Alps at Zermatt, and every flight going into London for weeks was booked. How was I supposed to get there?
No problem, he said. He would send his private Gulfstream G5 to pick me up. I answered that I was planning an assault on the Breithorn on Sunday, and that the guides had already been booked and the equipment rented. No worry, he would have the jet on standby in London until I was ready to return.
I said he was out of his mind. The day he was proposing would cost at least $100,000. He replied that he made over a billion dollars on my Swiss franc trade last year and it was the least he could do to say thanks. I said OK, but only if I could fly in the right hand copilot?s seat. ?Done,? he shot back.
I set to work immediately obtaining the necessary flight clearances. The nearby Swiss Air Force base at Sion was easy. But getting permission to land at Luton, just 45 minutes from the Olympics east London venue, was a little trickier. The British were unusually touchy about allowing private aircraft near the games, and my civilian inquiries hit a dead end.
Sion Airport
But after a few well-placed calls to the Pentagon it was settled. Looks like I owe the US Air Force Staff College a free lecture. I checked the NATO meteorological website, and miraculously, it looked like a cold front was veering to the right, and would just miss the Olympic site.
After my Zermatt strategy seminar, I literally ran to the heliport next to the Banhoff. In minutes, we were revving up the engines, and tore down the valley to Sion, an almost instantaneous free fall of 4,000 feet. The route the train covers in 80 minutes we did in ten. As soon as the chopper landed next to the G5 I hopped in with an overnight bag and we taxied for takeoff. At full power, we covered the route via Frankfurt and Paris in just 2 hours.
At Luton, a black Daimler limonene was waiting for me. I held my breath as the driver expertly negotiated the back roads to Stratford, hoping he wouldn?t get tied up in an immense traffic jam. Finally, a mile from the stadium we hit a wall of unmoving cars.
I jumped out and started briskly walking, carrying every form of ID I had, expecting to get challenged at every point. I was armed with a giant full page Olympic ticket with my photo that hung around my neck, a passport, my Department of Defense DD 214, a US commercial pilots license, a membership to the Surrey Rifle Association, and my old Scoutmaster?s card from a Boy Scout troop in west London. I made it just in time.
The atmosphere was absolutely electric, with everyone on a high. Try to imagine the excitement of the Super Bowl, the World Series, and the World Cup combined, and you might have an inkling of the emotions. Just getting here was a major achievement for all in attendance. The sound system was so loud that it reverberated straight through your body.
I sat in a high security VIP area about 100 feet from where Queen Elizabeth II sat surrounded by security men. No one can top the Queen on Olympic credentials. She opened the 1976 Montreal games herself.? Her father, King George VI, opened the 1948 London games. Her grandfather, King Edward VII, did the same for the 1908 games. I never believed for a second that she arrived by parachute with James Bond. Her husband, Prince Phillip, the Duke of Edinburgh, has origins that lie with the Greek royal family. Presidential hopeful, Mitt Romney, was not far away, sitting close to Bill Gates and Sir Richard Branson.
The ceremony opened with a medieval pastoral scene of farms, animals, and maypoles, even though most of the British lost their connection to the land ages ago. The London Symphony Orchestra tastefully opened with Elgar?s Nimrod. I quickly became the historical interpreter for the guests who surrounded me, as few could identify the significance of the Isambard K. Brunel figure played by Kenneth Branagh, the builder of Paddington Station and the first iron ship, the SS Great Britain.
Isambard K. Brunel
The rise of the industrial revolution was truly impressive, with its towering smokestacks, and the costs to the people and the land were clear. This was climaxed by the symbolic forging of the Olympic rings of steel. The smoke gave off the genuine stench of a steel mill.
After that there was so much going on in the arena, it was hard to keep track of it all. It was also a challenge to integrate the story line that played out on the big screen with the live action in front of you, and we all struggled to keep up. Unless you were an authority on English history, it was easy to lose track of what was going on.
I?m not sure many understood the significance of Emily Pankhurst and the suffragettes, the red poppies of WWI, and the blitz of WWII. Then 200 beds on wheels with nurses suddenly appeared as a tribute to the National Heath System created in 1948. After our recent Supreme Court decision on Obamacare, I wonder if we will do the same someday.
Rowan Atkinson was brilliant as the bogus member of the orchestra.? When 50 Mary Poppins holding umbrellas descended from the sky, I was afraid the whole thing would degenerate into a clutch of British clich?s. But then Paul McCartney played Hey Jude and we all nearly lost it.
The parade of the teams certainly challenged one?s knowledge of national flags. We took pictures of them and they took pictures of us. By the lime Lesotho appeared, I was starting to fade, so I told my neighbors to wake me up when the United States appeared. When they did, they looked glorious in their Chinese made Ralph Lauren designed blue blazers and berets.
Of course, the big suspense was over whom would light the Olympic flame. As a former marathon runner, I was hoping for Roger Bannister, who broke the four- minute mile in 1954. Then we were teased into thinking it would be soccer great David Beckham, who grew up nearby and arrived with the torch in a giant, glowing, powerboat. In the end, we saw seven British Olympic greats handing off torches to seven unknown kids to symbolize the passing of the generations. Finally, fireworks went off to the sound of Pink Floyd. How cool is that?
Only through the miracle of cell phones, Mapquest, and GPS was I able to find my forlorn limo driver. By the time I was dropped off at a friend?s house at Hampstead Heath, it was 4:00 AM. I heard it took three hours for Britain?s high-speed rail system to empty the 80,000 spectators from the stadium.
My return to Switzerland was considerably less dramatic. When the G5 landed back at Sion the next day, I took a taxi to the train station and caught a train up the mountain to Zermatt. En route, my friend called me and asked what my big trade for 2012 would be. I said I?d get back to him, but with a presidential election, a continuing European crisis, and a fiscal cliff ahead of us, I had great hopes. I got back to my chalet just in tine to turn on the TV and watch Michael Phelps blow the 400-meter individual medley.
The day checked another item off my bucket list, allowing me to give thanks for my life. And I?m now on my forth bucket list. Sorry, no financial stuff today. The surprise day at the Olympics blew a 24-hour hole in my work schedule, and I?m getting up at 5:00 a.m. tomorrow morning to climb the Breithorn.
Given the choice of bagging another 14,000-foot Alpine peak and publishing the 1,400th Diary of a Mad Hedge Fund Trader, I?ll settle for the altitude. You?ll just have to settle for the two Trade Alerts I sent out Thursday to sell short Treasury bonds and the yen, which I?m happy to report turned immediately profitable.
The full force of soaring oil prices really hit home when I arrived in Paris yesterday. As we passed a gas station, I mentioned to the driver that I didn?t know that they sold gas by the gallon in France. He answered that they didn?t. Those were the prices in liters I was seeing. He then voiced concerns about the future of his taxi business as fuel prices ratcheted up from $10 to $15 a gallon! It makes our own bleating that our prices at $3.50 a gallon appear somewhat detached from reality.
The Paris strategy luncheon, held at the Cercle National des Armees, or the French Army Officers Club, was one of the best yet. You know, the place where Napoleon used to hang out? I gave my talk under the watchful eyes of the portraits of Charles de Gaulle, President Francois Hollande, and the French Foreign Legion. Renditions of the battle of Waterloo were nowhere to be seen.
When I gave my event here last year, Internet access was only available in the lobby. Perhaps that?s why the French lost Vietnam? At the table on my right a group of French Air Force officers were planning the next air strike on Libya. On my right several Chinese admirals were negotiating to buy an aircraft carrier from the French Navy. It was some of the most fascinating eavesdropping I have ever done.
The event turned in to something of a reunion for me, with my former institutional clients from the 1980?s dropping by, as well as some of my French staff from the London office of Morgan Stanley. A gentleman from Warsaw, Poland won the prize for the greatest distance traveled. Spend your Zimbabwe dollars wisely. Maybe you can offload your holding to Bashar Assad, who may soon need them.
The big question at all of my recent lunches is ?Will there be a QE3? I offered the simplest of all possible explanations. Asset classes that prospered mightily from the $600 billion infusion of the Federal Reserve during QE2, like stocks, commodities, precious metals, and oil, will suffer the most from its demise. Asset classes that suffered from the rapid expansion of the monetary base this encouraged, like the US dollar, should see a rebound. The political balance in Washington makes a QE3 impossible, unless the stock market crashes first, vaporizing Ben Bernanke?s wealth effect. So don?t hold your breath. It would be a last desperate act.
Not All is Well in the City of Light
Everyone present complained that the Euro was in freefall at $1.22, but conceded that momentum could take it as low as $1.00 before it sees a reversal. I brought an extra suitcase to Paris, hoping to fill it with goodies for those on the home front at the department store Gallarie Lafayette, Mon Dieu! But prices were still so high that I only purchased a few postcards, knowing I could buy the same products at home on the Internet for half the cost, with free shipping and no import duties.
I spent the weekend playing tourist and visiting my old favorites, such as the Louvre, the Musee d?Orsay, Sacre Coeure, Montmarte, the Eiffel Tower, and a fine dinner floating down the Seine on the Bateaux Parisienne. The food is so good that even the local corner brasserie produced a meal to remember. A stylish people make it impossible to be overdressed, no matter where you go. In Paris, even the homeless have taste. A search for my front teeth on the Left Bank, which I lost in a riot there in 1968 when a flying cobblestone hit me in the mouth, yielded no results.
My next report will be from Frankfurt, Germany.
The city is now the most crowded that it has been at any time since WWII. Most hotels have tripled their rates, forcing traveling students on a budget to sleep in doorways and under bridges everywhere.? My usual abode here, The Naval Officers Club near Piccadilly, honored their regular price since I have been such a long term and loyal guest. However, I was the only one in the building not participating in an Olympic event, as the teams of several nations booked every room two years ago. The American team arrived today in their spiffy blue blazers. After randomly driving around London, the hapless bus driver broke down and admitted that he didn?t know where the Olympic Village was. And enterprising athlete whipped out his iPhone, Googled the address, Mapquested the directions, and they finally arrived four hours late. Still, they fared better than the Australian sailing team, whose sales were lost by Qantas Airlines. I decided to flee the madness in London for a day and visit some old friends in the countryside, the 8th Earl and Countess of Carnarvon. The late 7th Earl was an early investor in my first hedge fund and I have kept in touch with the family ever since. ? 
His grandfather, the 5th Earl gained fame and fortune from his co-discovery of King Tut?s tomb in Egypt?s Valley of the Kings in 1922. His early death, shortly thereafter, was the origin of ?The Mummy?s Curse? of depression era horror film fame. Many of his discoveries today make up the bulk of the Egyptian collection in New York?s Metropolitan Museum of Art, which the family sold to pay estate taxes. Recently, the family has been renting out their 350 year old home, a 15-minute taxi ride south of Newbury, the spectacular Highclere Castle, for use as a film set. The period drama series that resulted, ?Downton Abbey,? unexpectedly became a blockbuster in the US where viewers stupefied by endless low budget reality shows were starved for quality, thoughtful content and adult writing. It also sent 100,000 visitors a year their way, as well as $25 million in ticket fees. This windfall enables to maintain the house and the magnificent gardens in immaculate condition. The cash flow enabled them to ramp up the other family business, breeding racehorses for the queen. Portraits of past winners adorned almost every room. After tea with my hosts and a personal tour of the estate, I picked up some tea towels for friends at home who are into this kind of thing. I also saw a display of some spectacular early Egyptian relics, which the family found bricked up behind a wall 60 years after the Met sale. ? 
? The train has just emerged from the tunnel and we are now racing our way across the Norman countryside. Everyone?s cell phone has simultaneously started bleeping, mine with a text message welcoming me to France and informing me that I will be allowed unlimited data transfer, but will be billed $1.29 per minute for voice. Is that in English or French? Is there a surcharge for speaking foreign languages in France? The medieval red rick farmhouses whip by in a blur. The steward has arrived with my dinner tray, so I?ll sign off for now. I?ll report again after Paris. John Thomas