Archive for September 2012

BELMONT SUPER SATURDAY PICKS

September 28, 2012

We’ve got a huge day of horse racing coming up on Saturday with six stakes races at Belmont and another four at Santa Anita. I’ll be vacationing in Portugal this year during the Breeders’ Cup and likely won’t be able to see most of the races live, which means that my analysis and betting angles won’t be as in depth as they usually are. (Maybe this is for the best- I was in San Francisco last year for the Breeders’ Cup, bet the races very sparingly and had perhaps my best Cup day ever). As a result, Saturday is my Breeders’ Cup. And we’ll be seeing a lot of these runners back in five weeks. It looks to be a bit of a chalky day, but that doesn’t mean there isn’t money to be made. I’ll be concentrating my efforts on the Belmont card.

BELDAME- 9f, 1:58 CST

It’s difficult to see this one as anything more than a two horse racing between a couple of the nation’s most accomplished distaffers. ROYAL DELTA has been a force following her win in last year’s Breeders’ Cup Ladies’ Classic. While arguably at her best with a bit more distance than this race offers, she does have a dominating win at this distance to her credit in the Fleur de Lis three starts back, and finished a hard closing second into lone speed in her last outing, the Grade 1 Personal Ensign. She bested her main rival here, IT’S TRICKY, in that race, although that one did well to get back into the race after a very bad stumble at the start, and should be more forwardly placed here. She had won all three of her starts this year prior to that race at slightly shorter distances than this. While she has lost to the top choice in each of their last two meetings (she was 2nd in last year’s Breeders’ Cup Ladies Classic), it is interesting to note that she is 2 for 2 over this Belmont course and has never lost a one turn race, which this will be due to the configuration of the track at Belmont. The field separates considerably after those two, but looking for value, CASH FOR CLUNKERS figures to be a part of the early pace and only missed the second choice by 3/4 of a length two starts back. The other entries here, Go Unbridled, Maristar, Acting Happy and Disposablepleasure have spent 2012 racing against allowance company and being crushed by the best of the three year class, respectively.

1) Royal Delta 1-1

2) It’s Tricky 7-5

3) Cash For Clunkers 8-1

KELSO, 8f, 2:30 CST

This is another race where two horses look to be a cut above the rest, although there is a bit more intrigue underneath. Unless the course comes up wet, SHACKLEFORD is the horse to beat. Throw out his 8th place finish over a muddy track in his last race, and look toward his impressive Met Mile win over this course at the same distance while facing Grade 1 foes. The horse who finished three lengths behind him in that race, TO HONOR AND SERVE, flattered him by taking the $1 Million Woodward Stakes in his last outing, battling down the stretch to hold off one of the nation’s top older horses in Mucho Macho Man. He does have a dominating win over the Belmont track at this distance as he won the Grade 3 Westchester back in April, and seems to have been on the improve since then. TRICKMEISTER has shown early speed in all of his races this year and has hung with tough competition early before fading late in longer races. This distance could suit him, and he did finish ahead of the second choice over this course in the 9f Suburban after setting the pace, though he had the tables turned on him in the Woodward last out. There appears to be plenty of early speed signed on here outside of Shackleford and Trickmeister, including Tapizar, who has an allowance win over this course to his credit and won his last start, an 8.5f Stakes at Mountaineer, as well as the less threatening Pacific Ocean. Jersey Town has run against top competition and was actually 3rd in this race last year in a short field and could benefit from a pace meltdown but would be a surprise. Isn’t He Clever won back to back allowance races over this track back in June but has never been competitive against stakes company. Gallant Fields finally won an allowance claimer in his 7th attempt last out, and Golddigger’s Boy, a well beaten last place finisher in last year’s race, was defeated by Pacific Ocean in his last.

1) Shackleford 2-1

2) To Honor And Serve 8-5

3) Trickmeister 8-1

VOSBURGH, 3:04 CST

It’s awfully tough to go against SEAN AVERY here after the six-year old gelding posted an effortless 6f win over this track in his return following a 13 month layoff, drawing away through the stretch. He should be sharper here and we will cut him some slack for the 92 Beyer he posted in that race, as he was running into a fierce headwind. Speaking of Beyer figures, the only horse entered here that has posted a triple digit number is FORT LOUDON, who ran a 103 back in July when he won the Grade 3 Carry Back. He wasn’t disgraced when finishing 2nd in his last in the 7f King’s Bishop against a deep field of ten, turning the tables on some of the foes he lost two when a flat 5th in the 6.5f Amsterdam. He is expected the stalk the pace setters and be moving up late. CAIXA ELECTRONICA is always interesting for his deep closing style, which was best demonstrated in winning the 6f True North here on Belmont Day.  He is always coming late but has been off the board in his last three, and it appears he needs fractions of sub :22/:45 on the front end for his ground-saving style to be effective. There is some speed here with Little Drama, Royal Currier and The Lumber Guy (who comes off a 4-month layoff and shortens up here, and you get him in the entry with the top selection), but I’m not sure he’ll get quite the pace he needs. The Kelso might have suited him better, although this field appears more beatable. Another horse that could benefit from a hot pace is Rothko, who closed well to win the 6f Aristides at Churchill. Filling out the well-balanced field are Zero Rate Policy, 2nd to the top choice in his last effort but well beaten by the front-running Little Drama two back, 3-1 morning line favorite Justin Phillip (6th in this race last year as my pick to win), who was caught late to just miss the win here at 6f on Belmont Day and has hit the board in his last five, and Poseidon’s Warrior, who upset the Vanderbilt field over a sloppy track after missing the board in his prior two.

1) Sean Avery 7-2

2) Fort Loudon 6-1

3) Caixa Electronica 6-1

FLOWER BOWL, 10f, 3:38

The Irish mares look toughest in a very compelling and competitive edition of the Flower Bowl. Coming off an impressive closing win in the 9.5f Beverly D against a deep, talented field, the classy I’M A DREAMER stands to only benefit from the added distance here. Another invader is DREAM PEACE, who had her coming out party when finishing 2nd in a strong Diana field, finishing the 9f race willingly and posting a 101 Beyer after missing the board in graded stakes company overseas in two prior starts this year. She’s been flattered since, as the horse she beat handily by three lengths for the place spot in that race, ZAGORA, went on a bit of rampage after that, winning the 8.5f Ballston Spa Stakes impressively and posting a field high 103 Beyer. She’ll be tested here at a longer distance than she has ever run before, but has  been finishing her races well. One horse that should have no trouble with the distance is Hit It Rich, winner of 2 of her last 4, including the 11f Glens Falls and 12f Orchard. However, her 3rd place finish over this course behind Mystical Star and Aruna at this distance wasn’t flattered when those two were crushed by the top choice at Arlington. Another with no distance limitations is Starformer, who won the 11f Robert G. Dick Memorial, a Grade 3 race, but she takes a big leap up in class here. Coming back to the States after a second place finish in last year’s Breeders’ Cup Filly and Mare Turf is Nahrain, who may have caught a weak field that day and has been off the board in two of her last three across the pond. Rounding out the rest of the Americans are Halo Dolly, winner of the 8.5 f Yellow Ribbon at Del Mar but untested beyond that distance, Hessionite, a winner of her last three ungraded stakes who will be facing a more challenging field, and Bizzy Caroline, who was an easily beaten second in the Glens Falls and a distant 5th in the Modesty prep at Arlington.

1) I’m A Dreamer 3-1

2) Dream Peace 5-2

3) Zagora 7-2

JOE HIRSCH TURF CLASSIC, 12f, 4:12 CST

A small field of six is led by the red hot POINT OF ENTRY, who comes off a four race win streak that includes dominating victories in the 12f Sword Dancer at Saratoga, the 11f Man O’War over this course, and the 12f Elkhorn at Keeneland. He seems to have a stranglehold on his competitors at this distance and is the most likely single of the day in multi-race wagers. Looking for value in a horse that might be rapidly improving and be begging for added distance, we land on FINNEGAN’S WAKE, who closed hard to take place honors in the 10f Secretariat Stakes on Million Day. Dale Romans should have the three-year old ready to make a strong late move. I’ve lost a lot of money betting against LITTLE MIKE this year, first when he stretched out to 9f and won the Woodford Reserve Turf Classic on Derby Day and again when he stretched out to 10f and wired the Arlington Million. As he stretches out again to try 12f for the first time, I’ll try to keep him out of the winner’s circle and the exacta yet again for the same reasons that have burned me before. Third time’s a charm right? Again, he looms as lone speed. Also making the trip in are Hailstone, who is tested at this distance and beyond was but a distant 6th in the Man O’War, Treasure Beach, who has been off form all year and didn’t prove otherwise when 6th in the Million, and Kindergarten Kid, who though Grade 3 placed at this distance was winless in four Allowance Optional Claiming Races earlier this year.

1) Point of Entry 4-5

2) Finnegan’s Wake 10-1

3) Little Mike 2-1

JOCKEY CLUB GOLD CUP, 10f, 4:46

The Horse of the Year battle heats up as three of the top contenders try to separate themselves and earn likely favorite status for the Breeders’ Cup Classic (even though the winner of this race rarely wins that one). Also, the top four finishers from the 9f Whitney at Saratoga, among the year’s most important races up to this point, return here. I sometimes forget how rarely horses in the Classic division even run at 10f. Amazingly, only four horses in this field have ever won a dirt race at 10f or further in their career, and only one of them has won at 10f this year. FLAT OUT won this race last year and has been steadily improving in his four starts this year, all at shorter distances than his ideal 10f, and all away from his favorite Belmont track. In his last and strongest race of 2012 so far, a 3rd place finish in the aforementioned Whitney, he was coming late, closing to just miss the place spot. I think he will enjoy the return to this race track along with the added distance. The horse that just nipped him for 2nd in that race, RON THE GREEK, is the only horse in this field to win at 10f on dirt this year. He is more of a deep closer that needs a strong pace up front, and this race is shaping up to have much less pace than the Whitney did. Still, he must be respected at this distance as he makes his first career start over this track.  FORT LARNED enjoyed a perfect trip from right off the pace when he won the Whitney, and has fared well against top company elsewhere, winning the 9f Cornhusker and 9.5f Skip Away on the lead. He is likely to be the lone pace factor here, but will have to hold off a whole race full of closers as he tries 10f for the first time, and will also be making his first start at Belmont. Hymn Book is a stalker who won the 9f Donn Hcp. this past winter and finished 2nd in the 9f Suburban over this track in the summer, and should get some attention as well, but he appeared a cut below the top three when he finished a distant 4th in the Whitney. A couple of four-year olds from last year’s Triple Crown trail will try their hand at this race, although both have seen better days. Stay Thirsty hasn’t won a race since winning last year’s Travers, and despite a respectable 3rd in this race last year, has been off the board in his last two against top horses in one-paced efforts. Ruler On Ice won last year’s Belmont and was 3rd in the Breeders’ Cup Classic, but looks much less capable this year, having finished 8th in the Donn before moving into allowance company, where he has also been winless. San Pablo is a horse that is improving and that could be near the likely soft pace, coming off a win in the 9f Iselin Stakes, but will need to take another step forward to be a threat to hit the board here. Fast Falcon and Atigun are hard closing three-year olds who made a name for themselves with 3rd and 4th place finishes in the Travers respectively, although the form of that race took a hit when the first place finishers finished off the board in a weak Pennsylvania Derby last Saturday. Game Ball makes a wild move from 12f turf races to the dirt, and is well deserving of his 50-1 morning line. I’m looking for a complete symmetrical reversal of the Whitney finish here.

1) Flat Out 3-1

2) Ron The Greek 5-2

3) Fort Larned 7-2

EARLY PICK 3: Royal Delta, It’s Tricky/ Shackleford, To Honor and Serve/ Sean Avery, Fort Loudon, Caixa Electronica

LATE PICK 3: I’m A Dreamer, Dream Peace, Zagora/ Point of Entry/ Flat Out, Ron The Greek, Fort Larned

 

 

The Effects Of Inflation Upon Debt, And How Our Government Is Using It Against Us

September 22, 2012

My slightly younger but much more articulate brother posted a short, pithy tweet today, stating simply that “Debt is dumb.” I responded with a somewhat sarcastic, somewhat conspiratorial but ultimately factual tweet (in all of its limited capability) as to how in many cases, being in debt is far from dumb. My brother responded and asked me to elaborate, which of course was what I was hoping for, as this is a topic that really gets my blood boiling, aside from being a topic that I’d be willing to wager a majority of this country has no concept of, despite the seemingly high willingness of a large portion of the individuals living within the country to plummet themselves into debt while simultaneously being ignorant of the benefits of such a situation and/ or decision. This defeats the point.

Of course, it wasn’t something I could elaborate upon within the 120-word minimum required by Twitter, unless I wanted to release hundreds of successive tweets with little revisional editorial ability. So, I took the time to write out my message, which is admittedly about half educational and half far-fetched conspiracy theory. However, what I am getting at here is that the real value of one’s debt is highly dependent upon the movements of inflation (and deflation) in the economy, and that is not something that is based upon theory. It is a fundamental fact that few Americans take the time to rationalize in their heads, and do not immediately realize without a strong background in economics.

For example, let’s say that you bought a home for $400,000 that is now worth $200,000. For simplicity’s sake, let’s also say that you made no down payment and have no equity in the home- you are $200,000 in debt on the home because you owe the bank $400k and can only sell the home for $200k. Do you stand to benefit in one direction or the other from that debt based on whether there is inflation or deflation in the economy?

First, let’s clarify some definitions in the most simple terms. Inflation is the rate at which the costs of goods, services and commodities are rising, and thusly, purchasing power is falling. Deflation occurs when the costs of these things fall, and, all else equal, purchasing power rises.

It may not be immediately apparent on the surface, but you stand to vastly benefit from your $200,000 debt in the case of an inflationary scenario. There are many reasons why this is the case. Most simply, in an inflationary environment, by definition, the price of your house will rise. If it were to suddenly be valued at $400,000 again solely due to the inflation in the economy, you could simply sell the house at that price, pay the bank back the $400,000 that you owe, and your debt would disappear. It DISAPPEARS just because of the inflation! Also, all else equal, in an inflationary economy you would expect to have higher nominal wages, adjusted for the changing value of the currency although the same in real terms (buying power). However, since the original nominal $200,000 debt stays constant as the real value of the dollar changes, that debt amount becomes less and less significant as inflation rises and by definition, the value of every $1 becomes less.

The main negative in an ordinary debt scenario in this example is of course that as inflation ramps up, so do interest rates increase, and money becomes more expensive to borrow. However, your mortgage is not effected by increases in interest rates, since you’ve locked in a (presumably low) rate at a point in the past, and you’ve already borrowed the money at that previous juncture. (This is not to say that the value of a mortgage held by the bank is not impacted by a change in interest rates- quite the opposite, or my profession would not exist! But that’s a topic for another, quite a bit more complicated post).

In contrast, a deflationary scenario in this example would be a disaster- the value of the house will fall, hence increasing your debt. Also, you are likely to see a fall in wages, or even be laid off, as a result of lower prices and productivity in the economy at large. Your debt is rising at the same time that your income is falling. Interest rates would fall towards zero as they are now, leaving you with little potential return on any money you have saved.

You may be wondering how these forces take hold of the economy to begin with. First, let me differentiate between “good” inflation and “bad” inflation.

Good inflation happens when value is added to the economy by way of innovations, developments in technology, introductions of efficiencies in goods and services, etc. Prices rise, but productivity rises in lock step, at a rate between 2-3% ideally, and since GDP is rising at the same rate that the currency is declining in value, there is no real effect on buying power from the inflation. This is, allegedly, what the Fed is trying to accomplish, but I have my doubts that this is really their endgame as I will demonstrate further below.

What has happened instead now sets the stage for “bad” inflation- inflation that is created by the government without an increase in GDP to accompany it and justify it. This, of course, is the result of printing money out of thin air, as opposed to having a hard asset behind it to justify it. Deflation is much easier to grasp, as it results simply from a lack of aggregate demand, which, despite what elaborate formula you may have learned in school, is almost completely a function of what is called the consumption effect. This, essentially, is nothing more than the amount of discretionary income available within an economy (and to some extent, the amount of personal borrowing within a bubble, read: DEBT. But this, again, is a topic for a different blog.)

Think of it in the simplest terms. You and I are shipwrecked on a desert island. We agree that in order to survive, I will spend my time gathering water from a waterfall for us to drink, and you will spend your time growing and harvesting potatoes for us to eat. We agree that I will trade 1 bucket of water for every 2 potatoes you grow. This is our simple economy. Then, one day, another ship wrecks on our island. The captain is an expert at making rum from the island’s natural resources. We want rum so we can enjoy ourselves in this awful situation. So I agree to deliver 1 bucket of water for every bottle of rum, and you agree to trade 2 potatoes for every bottle of rum.

In this example, we use commodities as our currency. If our island became more sophisticated, we might print paper money, and might be able to trade in our potatoes, water and rum to the central bank who could hold those commodities as reserves, and give us paper money in exchange for those assets. The point is that we would have the paper money, but the central bank would have hard assets to justify the creation of said money (this used to be gold in the USA). The money is merely a symbol of the assets’ value to make trade less cumbersome as the economy grows and new goods and services are added (another guy wrecks and starts growing coconuts, another guy wrecks with a jet ski in tact and starts giving jet ski rides for a charge, etc).

If we were to have done this before the rum producer arrived on the island, and decided that our 2 for 1 trade had a value of $1, and traded say, 200 potatoes and 100 buckets of water  as reserves for cash to the central bank, we’d each have $100 paper money now, right? Then after establishing the trade value for 1 bottle of rum as being equal to that $1, our new companion could trade in 100 bottles of rum to the central bank as well, and he would also have $100 of paper money. Take a deep breath and make sure that all makes sense.

So, what we have here is a situation where the money supply has increased (there is now $300 circulating in the economy instead of $200), but you and I did not lose buying power as a result of the paper money injection into the economy. You still get a bucket of water for two potatoes just as you did before, and can even get a bottle of rum now. This is an example of good inflation. Dollar values of goods may increase now that there is more money circulating within the economy, but the money is there for a reason- a valuable good/ service has been added to the economy- and, most importantly, buying power does not change.

Compare that to what the U.S. economy has set itself up for in the event that any of the money that the Fed has printed (which is currently sitting on the sidelines in the form of treasuries and mortgage backed securities) finds its way back into the economy as a result of a sudden improvement in economic conditions. You’re looking at trillions of dollars of fake money that will serve only one purpose upon entrance into the actual marketplace- the complete and utter decimation of the dollar, as the sudden influx of fake money will drive prices exponentially higher. This is the dreaded hyperinflation scenario.

Thankfully, this is a long way from actually happening. The economy continues to struggle and banks are hesitant to loan; all the while people are equally hesitant to seek loans, even at historically low mortgage rates. And, we do have to trust that the Fed could anticipate changes in the economic environment quickly enough to unwind QE before it caused dangerous repercussions in the economy, don’t we?

This brings me to the quasi-conspiracy theory  that I was getting at via my tweet. Governments LOVE inflation. It gives them an excuse, and a solution, to spend money that they don’t have. Going back to my earlier example, what’s the easiest way to make a $16 trillion deficit disappear? By inflating it away to the point that $16 trillion isn’t even a lot of money anymore. In the end, inflation really just becomes a sneakier, more conniving way for the government to tax its citizens. Who gets hurt the most if hyperinflation happens? People like me, who have all their assets in cash, who incidentally see deflation as a positive thing– I can buy more stuff with the same amount of money. But deflation terrifies the Fed above all else, and not for the reasons they say it does. They fear it because it makes current government debt even more substantial than it already is, and it renders all future government deficit spending more damaging than it already is.

Inflation is the cruelest power that a government has upon its citizens because it devastates their savings and decreases their buying power. It’s akin to a sudden tax on all of your current possessions, aside from being outright thievery. Meanwhile, the government makes out huge because they can spend dollars they don’t actually have while simultaneously decreasing the cost of replacing those overspent dollars by printing more of them and essentially stealing from its citizens’ savings accounts and daily discretionary spending.

Is it a coincidence that the Fed’s strategy for getting the economy back on track happens to perfectly coincide with the current administration’s agenda to spend beyond its means? Romney has already said that Bernanke is out if he is elected. It seems awfully coincidental that Bernanke’s supposed solution to our economic woes gives Obama the excuse he needs to spend money that the nation doesn’t have while saving his own job as Fed Chairman in the process. You can decide for yourself though.

The moral of the story is that if you feel like hyperinflation is about to take hold, get yourself in as much debt as you possibly can, because you’ll have the assets, and the paper money you will owe in exchange for them will essentially be peanuts eventually. This was my initial point, and our government is well aware of this reality. Heck, they’re doing it already.

WINE OF THE MONTH- SEPTEMBER

September 16, 2012

Ever since returning from my trip to France this past April, I’ve been paying special attention to wines from the Rhone Valley. This famous growing region, which I was lucky enough to devote a day of my trip to visit, is unique for its terroir. Soils are almost completely limestone rock and provide for an inimitable flavor profile in these Syrah blends. After a highly acclaimed 2009 vintage, it appears that the 2010s, which are just hitting the market now, may be even more spectacular. Unlike its French counterparts in Bordeaux, Burgundy and Champagne, many of these delicious blends are widely available at bargain price points. One of the most recognizable producers in the region is M. Chapoutier, who creates wines that run the full gamut, ranging from $13 Cotes du Rhone and Cotes du Russillon-Villages wines all the way up to $500 Ermitage, and everything in between. The quality, even at the bottom end of the spectrum, is consistent and merits attention from value seekers.

M. Chapoutier Cotes du Roussillon-Villages Les Vignes de Bila Haut 2010, 90 Points, $13, 50,000 cases made- Lovely cherry and wet mineral on the nose, with a touch of toasty oak. Juicy black cherry, plum cake and dark raspberry fruit flavors are floral and perfumey, if a touch tart. Intense and focused, layered with oak and exotic mineral spices, and lingering long on a rich chocolate note.