Super Bowl LXVI - The Locks Consults Mayan Prohecy

The Locks didn't really have to do a lot of work to find how to wager on Super Bowl XLVI.  We all know that there is a well known jinx against Tom Brady so the Patriots fate was really sealed years ago.    But the Locks doesn't like leave much to chance especially for the Big Game.  
During one of my journeys abroad, I came across a shaman who pointed me to the prophecies of the Mayans as a good predictor of contests that are denoted in roman numerals.   The Mayans are the same guys who 1000+ years ago used to roam the same streets that you can find Senor Frog's today.   The Mayans are getting a lot of publicity this year because they've boldly predicted the end of world in 2012.    Based on the shaman's advice I've researched the Mayans predictions for the future.  I actually found one Mayan wood carving, amazingly, in the corner of a rare curio shop called Spencer's Gifts and the prediction is quite interesting, so here's the quote:

In the last year of the world…There shall be a contest on a grid of iron  with a skin of a pig.  This contest shall be in the city of indians between large men from a city that never slumbers against feeble men from a city of beans. 

The feeble men will be led by a man that wears boots of a lady and he will be slaughtered in the contest.  The large men shall win the contest with the tally of 27.  The tally of the feeble men shall be 24.  The chosen ones who shall wager for the large men and few tallys in the city of sin shall also prosper.

I have deeply analyzed these words written in an  Mayan dialect which closely resembles English and have interpreted this to mean that the Giants will cover the spread and also to bet the under.  


So the Locks are: Giants and the under. 


Good Luck! Go New York!  Beat Brady!

The Carried Interest Debate is a Waste of Time...It's a Zero Sum Game

There are too many people that spout gibberish about carried interest taxation that don't know what they are talking about.  There are two falsehoods that I'd like to address:


"Hedge fund manager's pay a 15% tax rate on their earnings"
"Hedge fund manager's are cheating the government out of revenues"


Let's address the first falsehood...hedge fund manager's pay a 15% tax rate on their earnings - that is false!!!  Their true Federal effective tax rate is going to be a figure far higher that.   To provde this, let's look at how fund managers earn their money....they earn management fees and performance compensation.  
1) Management Fee 1%-2%+ on Assets under Management.  That fee is taxed as ordinary income (35% Federal tax rate) and hit with self-employment tax (2.8%).
2) Performance Fee - generally the fund manager will receive 20%+ of the profits of the fund.  This will be taxed depending on who the fund manager is managing money for. For the money of non-US investors and US tax exempt investors (this could be the bulk of the money some managers manage), the fund manager will be taxed on this as a fee as such will be taxed at ordinary income tax rates and also hit with the self-employment tax.  


Generally, its only the earnings on the money that the fund manager runs for US individuals will be taxed as a profits interest (aka performance allocation..aka carried interest).  That is they will receive 20% of the profits of a fund, the investor will get the balance.  Accordingly, they will be taxed based on how the profits are earned.  


Let's work with an example it's easier to show how little a hedge fund manager may actually pay only 15% of tax on.

• Alpha Fund has $100,000
• Fund Manager A earns a 2% management fee and receives 20% of the funds profits.
• The Fund is split between 50% of US tax-exempt and non-US investors and 50% taxable US investors.
• The Fund earns $10,000 in the following character:
• Dividend Income Qualifying           $1,000
• Dividend Income- Non-Qualifying $1,000
• Interest Income                                 $2,000
• Foreign Currency Gains                  $1,000
• Short-Term Capital Gains               $3,000
• Long-Term Capital Gains               $2,000

The Fund Manager will earn a total of 2% x $100,000 = $2,000 + 20% x $10,000 = $4,000
On that $4,000 of earnings the Fund Manager will pay $2000 x 35% + $1400 x 35% + $600 x  15% = $700 + $490 + $90 = $1,280 = 32%.   For those that need some help, 32%>15%.


In actuality, many hedge fund managers actually pay the full 35% on all of their earnings.  Because of the complexity of the Internal Revenue Code many managers that have high volume of trading simplify their tax accounting by making an election to treat all of the income of their fund (and of their profits interest) as ordinary income as such all earnings management fee and performance fee will be taxed at 35%.   There are also many hedge fund managers that don't make this election but may already be paying 35% tax rates on all of their earnings because they may not hold securities long-term.


So when we are talking about hedge fund managers only a few may actually pay a rate less than 35% and those that pay tax on a lower rate actually only a small portion of those earnings would be eligible for the 15% rate.  Admittedly, private equity funds make most of their money on long-term capital gains but the long-term capital gains tax rate still wouldn't apply to the private equity fund manager's management fees and the performance fees earned on US tax-exempt/non-US investors capital.  


I also can share examples of how in some crazy years such as 2008 and 2011 where some fund managers paid a tax rate far higher than the 35%!!  


The second falsehood is that these manager's are cheating out the US Treasury of revenue and actually if compensation structures and taxation remain the same the US government is bound to earn more from the status quo rather than if the tax law was to be changed.


Let's look at a simple example...

• Fund manager A manages Alpha Fund.
• Alpha Fund earns $100 long-term capital gain.
• Investor X owns 100%.

Let's take an example if a fund manager doesn't charge a profits interest.

• Investor X will pay $15 tax on the capital gain that the fund earns.

Now let's say the Fund manager receives a 20% profits interest.

• Investor X will pay $15 x 80% = $12 of tax on his share of capital gains.
• Fund Manager A will pay $15 x 20% = $3 on his share of capital gains.
• Total of $15 of tax on the capital gains.

Now let's look at this proposal to tax carried interest as ordinary income.  Presumably, Fund Managers will change the profits interest to an actual fee so investors can get benefit of the expense.


So case under Proposal.

• Investor X will pay $15 of tax on capital gains will get a $7 ($20 x 35% ordinary income tax rate) tax benefit for the performance fee expense.  So they will now pay $8.
• Fund Manager A will pay $7 ($20 x 35%) of tax on his performance fee.

Again in total its $15 of tax but the shift of the burden goes from the Investor to the Fund Manager.   This is simple stuff and simple math but not sure why so people don't understand it -- including some people that are supposed to be financial market gurus.   Really all this whole huge debate is over who really gets stuck with the tax bill - one rich guy (the fund manager) or another rich guy (the fund investor).   Hedge fund investors understand the issue and live it because they are smart enough and have enough money to deal with it.   But to say we all who aren't hedge fund managers are being screwed is a lie.


The US government isn't being cheated here -first this is how the law is written and second, as you see there is no reduction in total tax revenues - its just who pays it.  Actually if we add the self-employment tax and the new Medicare tax on investment earnings.   The US government will be better off having the carried interest taxed as capital gains (thus subject to the 3.8% Medicare tax) rather than earnings (thus only taxed at self-employment tax rates of 2.8%).


So let's stop the debate - its a waste of time.  Its a zero sum game....also it's making a lot of people look foolish who get up on their soapbox - who haven't taken the time to do the math!

Brady in a Downward Spiral....Will Not Win the Super Bowl

Pictures don't lie....Nice Nose Job Tommy Boy!

Tom Brady might have won the battle of the Pious vs the Patriot, Good vs Evil, Jesus vs Satan matchup against Tim Tebow and the Broncos, and then squeaked one out when the Raven's Billy Buckner 'er Cundiff pulled one wide left but Tommy will not win the war.  A Super Bowl victory is out of the question for Brady and Bellichek's Boys.


As we know, Tom Brady is jinxed (click here) and has been since he's hooked up with super-model, Gisele Bundchen.   Let's see since the beginning of 2007, when the Boston Globe first reported  that they were dating....


January 21, 2007....loses to Peyton Manning and the Indianapolis Colts in the AFC Champ game.


February 3, 2008...despite running through the season undefeated and going into the Super Bowl as a 12-point favorite. the Giants D-line rattles Tommy and the G-men win.


September 7, 2008....season opener vs Kansas City, Tommy Boy suffers a season ending knee injury, had has original surgery botched and was riddled with infections in the knee, there were even viable rumours that Tommy had his leg amputated from the knee down. 


April 4, 2009....Brady's wedding to Gisele was marred by gunplay when a couple of Brady's guests started shooting at wedding photogs.  


September 9, 2009....involved in a 2 car accident in the Back Bay in the wee hours of the morning...what was he doing speeding through the Back Bay at such an early hour?? was he drinking? was he returning home from a tryst?  We will never know as the Boston police, of course, sweep details of accident under the rug and blame accident on a poor laborer.


January 10, 2010....throws 3 interceptions in a crushing playoff loss to the Baltimore Ravens


July, 2010...Shows up to training camp with a new nose.  Obvious in the off-season, Brady has had a rhinoplasty and possible other cosmetic procedures including hair implants.

Summer 2010....See pic....'Nuff said------>


November 30, 2010...Uggs, an Australian company that makes furry women's boots, announces that Tom Brady will be their new US spokesperson.


January 16, 2011....despite a 14-2 regular season record, Brady and Patriots lose to the Jets in a Divisional playoff game...Brady is sacked 5 times and tosses an interception.


September 25, 2011....Tom Brady is unable to beat a winning team during the regular season plus can't beat the lowly Bills where TB tosses 4 interceptions.


January 20, 2012...Gisele and Tommy move into a $20mm mansion in Brentwood (L.A.).  TB is criticized by environmentalist because of the footprint of the 20,000 sq ft monstrosity but more importantly he is criticized by dudes worldwide because no grill can be seen in the numerous photos of the crib plus its understood the home doesn't contain a single copy of "Scarface". 


January 22, 2012....Tom Brady beats the Baltimore Ravens to win the AFC Championship game but admits "I sucked pretty bad tonight" and rightly attributes the win to the maligned New England D.


February 5, 2012....Will face the New York Giants in Super Bowl XLVI...a team he has already lost to this year. 


It appears that Tom's career arc has taken a similar stride as another cosmetic surgery junkie, Michael Jackson.   A meteoric rise followed by a slow decline into mediocrity.  I'd equate Brady's 2011 season with Jacko's HIStory album and tour....yeah, I didn't remember that one either.


Good luck G-men!....but then again luck isn't needed as the story is already written and Brady and his Patriots are already doomed.

2012 Kentucky Derby - The Locks Picks the Early Contenders

Happy New Year!  As well as Happy Birthday to all Thoroughbreds....as all thoroughbreds are one year older on January 1.  So the 2yos are now the latest crop of 3yos thus we can start thinking more seriously about the first Saturday in May under the Twin Spires.


It is highly likely that the winner of this year's Kentucky Derby has already raced.   We'd have to go back 130 years to find a horse that won the Derby without running as a 2yo (Apollo in 1882).  


Not in any specific order lets look at these baker's dozen of horses that may win or at least race in the 2012 Kentucky Derby.


Fed Biz
Giant's Causeway - Spunoutacontrol, by Wild Again
Trainer: Bob Baffert


Impressive winner of a 1 mile maiden at Santa Anita.  Bob Baffert thinks highly enough to tab him as a "derby prospect".  Bred for the Derby distance.


Algorithms
Bernardini - Ava Knowsthecode, by Cryptoclearance
Trainer: Todd Pletcher


2 for 2 including a win in an allowance at Gulfstream Park. Derby pedigree.


Union Rags
Dixie Union - Tempo, by Gone West
Trainer: Michael Matz


BC Juvenile runner-up, Champagne stakes winner.  Could have been early Derby favorite if colt was able to track down Hansen in the BC Juvenile.   Hansen doesn't appear to be a Derby winner (possibly a runner though) due to running style but Union Rags looks to be on the Derby trail.


Sabercat
Bluegrass Cat - Miner's Blessing, by Forty Niner
Trainer: Steven Asmussen


Is 3 for 3 in last 3 races.  These races include winning 2 two-turn stakes races by a combined 10 lengths. 


Gemologist
Tiznow - Crystal Shard, by Mr. Prospector
Trainer: Todd Pletcher


Won already twice going 2 turns at Churchill Downs.  This includes winning the Kentucky Jockey Club.  


Timely Tally
Mr. Greeley - Score, by A.P. Indy
Trainer: Ian Wilkes


Rallied impressively to get 3rd in the Kentucky Jockey Club at Churchill Downs. 


O'Prado Again
El Prado (IRE) - Leh She Run, by Pulpit
Trainer: Dale Romans


Winner of the 9 furlong Remsen Stakes.  Maiden win also was going 9 furlongs...thus building good foundation for longer races (ie, the Derby). 


Summer Front
War Front - Rose of Summer, by El Prado (IRE)
Trainer: Christophe Clement


Horse is 3 for 3 including 2 stakes races.  Diana Beach win was impressive because of a bad start but rallied to win.  Clement isn't really one known to catch Derby fever and horse is yet to race on dirt but could be talented enough to warrant a dirt try in a Derby prep.


Lemon Juice
Johannesburg - Lemon Lady, by Lemon Drop Kid
Trainer: Dane Kobieskie


Profile of this colt is one that normally I'd tab as my sleeper Derby pick.   Already has 4 wins, never out of the money in 7 starts at 4 different tracks.  Won the Laurel Futurity, a race that has given me early Derby picks of Captain Bodgit (2nd in Ky Derby) and Barbaro (winner Ky Derby).   Only one issue here is that the Laurel Futurity has been dialed back to a 6 furlong race and Lemon Juice hasn't raced longer than 7 furlongs....we'll see if the colt stretches out.


Hierro
Hard Spun - Brief Bliss, by Navarone
Trainer: Steven Asmussen


Vegas future odds have moved on this colt shows that someone likes him beyond just his impressive maiden victory at Churchill Downs in November.


Creative Cause
Giant's Causeway - Dream of Summer, by Siberian Summer
Trainer: Mike Harrington


Third place finish in BC Juvenile after a successful campaign through the West Coast's best 2yo races.  Derby pedigree.


Liaison
Indian Charlie - Galloping Gal, by Victory Gallop
Trainer: Bob Baffert


3 wins in last 3 races.  Last 2 races/wins have been going 2 turn in stakes races.  Willl the Indian Charlie pedigree be able to get the Derby distance will be a question that needs to be answered.


Ever So Lucky
Indian Charlie - Bally Storm, by Summer Squall
Trainer: Jonathan Sheppard


Interesting horse to follow....2nd in the Kentucky JC at Churchill Downs.  Something of an enigma.  Horse is trained by Jonathan Sheppard for Augustin Stables which is a combination better know for long-distance turf horses and stepplechasers.   But this is an Indian Charlie colt that likes to race on the front end.


If you are in Vegas any time soon...you can possibly get good odds on some of these by betting a Derby futures bet.


Good Luck!!!!

Arima Kinen (The Grand Prix) - The Locks Picks the Winners

Sunday is Christmas and Santa will be bringing all good little boys and girls presents.  Over Christmas Eve night it will be already Christmas in Nakayama, Japan which is the site of the Japanese Grand Prix which is almost more power packed than the Japan Cup.   Orfevre (オルフェーヴル), Hiruno D'Amour, Earnestly (アーネストリー) are added from the Japan Cup field to round out the entries.   Orvevre hasn't raced since capturing the Japanese Triple Crown.  Hiruno D'Amour is back in Japan after racing in the L'Arc and Earnestly after winning a couple of graded stakes over the summer is back from a lack-luster Tenno Sho.  


So Christmas will be celebrated not only with Santa-san and eating Kentucky Fried Chicken but with some high quality horse racing. 


The Locks are....


I am going to take a stand against the favorite 2-1 Orvevre, the winner of the Japanese Triple Crown.  Orvevre has yet to race against older horses.  And the 3yos that last raced in the Japan Cup didn't fare very well. Win Variation (ウインバリアシオン ) could only manage a 5th place showing in the Japan Cup after growing tired in the stretch.  Win Variation probably is the 2nd best 3yo this year with place showings behind Orvevre in the Japanese Derby and Japanese St. Leger.  


Tosen Jordan is the winner of the Tenno Sho winner also was runner up in the Japan Cup.   Has 3 wins out of 4 tries on the Nakayama course...only loss was last year in this same race...but last year set pace and tired in stretch...probably wont repeat strategy this year.


Buena Vista is coming off victory in the Japan Cup and is such a consistent horse ,17 1st or 2nd place showings out of 22 tries including a 2nd in this race in last 2 years.


Hiruno D'Amour is a horse that is capable of winning this race and at 40-1, I give it a shot.  Has a 2nd place finish as 6th favorite in a Grade 1 at Nakayama before.   Has had time coming back from France and running in the L'Arc to be fit for this race.


 Victoire Pisa also is capable of winning this race....actually any race in the world after winning the Dubai World Cup but fitness is in question as seen by poor showing in Japan Cup.  But can't get past fact that has raced 4 times at Nakayama and has won 4 times....including winning this race last year.  


◎ Tosen Jordanトーセンジョーダン 16-1 
○ Buena Vista ブエナビスタ  4.3-1
▲Hiruno D'Amourヒルノダムール 41-1
△ Victoire Pisaヴィクトワールピサ 12.6-1


Lets win and exacta saver on Tosen Jordan.
Lets box the 4 horse in exactas and trifectas


Good luck....and most of all Merry Christmas!!!

Hong Kong International Races day - The Locks Picks the Winners

Sunday is Hong Kong International Races day....a mini-Breeder's Cup-esque day of races.  There are 4 G1 races at Sha Tin featuring some of the world's best  

The Hong Kong Vase goes 1 1/2m...The Locks likes Dunaden, the winner of the Melbourne Cup at 8-1.  Redwood has raced consistently amongst top competition all over the world.  Trailblazer only has 1 win but did just place 4th in the Japan Cup.  Thumb's Up just won in graded stakes company at Sha Tin - but would hope for better odds...if Camponolgist, an Italian racing star goes off better odds slot the paisan in instead of the local horse.

香港　Vase 2400m
5 ◎ Dunaden 8 -1 odds
8 ○ Redwood　１０
1 ▲ Trailblazer　１０
9 △ Thumb's Up　８


Sprint is a 6 furlong featuring 14 runners.  Little Bridge has raced exclusively at ShaTin and has never been out of money going 6f.  Rocket Man from Singapore is winning machine 18 wins out of 23 tries...has won also in Dubai and Sha Tin..only  out of money start came in its only appearance in Japan.  Curran Chan has won last 4 races all graded.  Lucky Nine has 8 out of 11 in the money finishes including winning at 6f at Sha Tin.


香港　Sprint 1200m
6 ◎ Little Bridge 10 
１ ○ Rocket Man 4
１４ ▲ Curran Chan　７
４ △ Lucky Nine 4


In the Mile, the Locks likes Cityscape has 2 graded wins this year going 1 mile - 12 out of 15 in the money finishes.  Sahpresa was 3rd in this race last year but comes in race with better form due to a successful 2011.  Destined for Glory won going a mile at Sha Tin recently beating top HK horse, Ambitious Dragon.  Apapane beat Japan Cup winner, Buena Vista, in a mile race this summer. 


香港　Mile　１６００m
1 ◎　Cityscape 12
13 ○ Sahpresa 7
8 ▲ Destined For Glory 11
14 △ Apapane 20


In the HK Cup, the Locks likes Ambitious Dragon.  AD since last October has 8 wins in 10 tries including 2 at 2000m.  Byword is a horse I liked in BC Mile but disappointed...but has a great record this year including a 10f win over Cirrus des Aigles.  CdA hasn't been out of money in 2011 including winning British Champion Stakes. California Memory 


香港 Cup 2000m
2 ◎　Ambitious Dragon 2
3 ○ Byword 7
1 ▲ Cirrus des Aigles 2
6 △ California Memory 10


In betting would box exactas and trifectas and make win bets on top 2.


Good luck!!

2011 Japan Cup Dirt - The Locks Picks the Winners

Last week was the Japan Cup, this weekend is the Japan Cup Dirt which is another Grade 1 race worth over $2 million.  Race is run at the Hanshin race track near Osaka going 1 1/8m (1800m). Although most JRA races are run on the turf, there are still some very good horses in this race. Including the runner -up in the Dubai World Cup and the winner of this race last year in Transcend.  Transcend rebounded well from that race with 1 win and 1 second since coming back from the UAE. Transcend hasn't been worse than 2nd in last 8 races.  Espoir City won this race in 2009 and has competed in the BC Classic. EC loves the distance with 6 wins and 1 second in 7 races and likes Hanshin with a perfect 2 for 2 record on the track.  Transcend and Espoir City will be the top 2 favorites and they will be difficult to overlook.  However, will need to consider others as well as pace will be a definite factor in the race.  


Tosho Freak will set the pace with Transcend and Espoir City wanting to chase the pace.  Depending on how fast Tosho Freak will go will set the fate for Transcend and Espoir City.  If setting too fast fractions then look for horses coming off the pace like Nihonpiro Ours  or Miracle Legend.  Nihonpiro Ours has not been out of the money in its 13 race career including 2 wins on the Hanshin dirt.   Had the fastest last 3 f time in the key Miyako Stakes in last race.  Miracle Legend will come off the pace and will benefit from fast fractions from the leaders.  Miracle Legend has 8 wins in its 15 race career including winning last 3 all at 1800m...actually all of this 4yo fillies wins have come at 1800m.   


The Locks are:


◎ #12 Nihonpiro Ours ニホンピロアワーズ
○  #11 Miracle Legend ミラクルレジェンド
▲ #16 Transcend トランセンド
△ #6 Espoir City エスポワールシチー


$1 Exacta #12 over all

$1 Trifecta Box 12.11.16.6