Who Do You Want To Be?

“Those times when I’ve been down, when I’ve been kicked around, I hold onto those. In a way, those are the best times I’ve ever had, because that’s when I’ve found out who I am. And what I want to be.”
-Brett Favre

The most interesting reality associated with Favre’s quote is the context. After being named “Sportsman of the Year”, Sports Illustrated asked him what his favorite memory was, and that was his response…. I have kept this quote taped on the insert of one of my investment notebooks. I always re-read it when I am looking for the strength to take the shot that no one wants to take.

Being a bear for the better part of the last year has had its loneliness. This morning, you could fill a Christmas concert hall with naysayer “strategists” and television entertainers alike who are “bearish.” Taking the shot on the bullish side of China a month ago and taking it here in the USA this morning is all one and the same. It’s the one very few bears want to take. 2008 is over - and I guess they want to ride whatever it is that they are saying now out… There’s one big problem with that. This is a full contact sport, and the game is still on!

You see, the way the Street works is that “strategists” get overpaid to be stagnant. The longer they “stay with the call”, the higher the probability that they don’t ruffle any client feathers… or at least that’s what the leaders of ‘Investment Banking Inc.’ have taught them. Let’s wake up to The New Reality folks. We live in an interconnected world where global market factors interact expeditiously. The facts change daily, and when they do… Brett Favre would probably have my back in suggesting that you better have your head up.

That’s the only way that a 39-year old grey bearded man could still be marching down one of professional life’s toughest fields with a winning record. He’s a 3 time NFL MVP (1) for plenty of reasons, but I think the most relevant one is that it’s because he is a realist. He doesn’t get bogged down by his mistakes. He learns from them, and takes every snap for what it is – a new opportunity to do better.

Every day, I wake up at 4:03AM, and drive to New Haven, CT for one reason – to win. This is where the best team I have ever worked with will have the lights on. This is where the best questions are asked. This is where American Capitalism has re-found its footing.

Winning in the immediate term and the long term are two undeniably different things. And while many investors will tell you that “stylistically” they have different durations in their investment objectives, I won’t. I want to be right every single day. I am not ashamed of that fact. It is what it is. It took me a decade on Wall Street to remind myself of “who I am. And what I want to be.”

This morning, I am waking up to the most invested position I have held in 2008. I have the following Asset Allocation: US Cash 50%, US Equities 15%, Int'l Equities 19%, Commodities 16%. I am not getting invested for any other reason than to be right. Being right on Hong Kong being +41% since October or China +20% since November is not what waking up for this morning’s game was all about. Those are wins. Today is a new opportunity to add to and improve our record with our US stock market and global commodity market “Re-Flation” call.

Central Bankers around the world are going to get us all paid by doing nothing more than what Alan Greenspan did between 2001-2003. They are going to cut interest rates and devalue their currencies in order to re-flate. Taiwan cut interest rates by the most in 26-years last night taking their benchmark rate to 2%. South Korea cut rates by the most EVER, taking rates down by another 100 basis points to 3%. Don’t disregard the context of these coordinated Asian rate cuts – only 6-9 months ago (when I was bearish on Asia), these governments were raising rates!

Greenspan’s ghost has gone global folks. In Switzerland the government has effectively cut rates to zero on a real basis this morning, taking rates to 0.50%; Brazil is floating the trial balloon out to the trading community that they are ready to cut; and our Depressionista dog fighter pilot “Heli-Ben” is preparing to drop FREE moneys from the skies in t-minus a week.

This is why the US Dollar is getting smoked this morning – it is down -2.6% for the week. This is why the CRB Commodities Index is +6.3% for the week to date. This is why Russian, Middle Eastern, and Canadian equities are all rallying. Commodities are the most levered asset class bet on “Re-flation.”

I am less interested in throwing the capital allocation ball to any equity market other than the one receiver that’s wide open and staring me right in the face – she’s American, and no one thinks she can catch it, never mind running it down the field for six points. I understand the bears, because they have become me.

It takes a bear to know one. “Those times when I’ve been down, when I’ve been kicked around, I hold onto those…” I am ready for today’s 930AM game time. Ready… set… hut, hut, hut!  Let’s go get that SP500 target of 931!

Best of luck out there,
KM


Long ETFs

DIA –DIAMONDS Trust Series – Oil is trading up to 45.93 this morning, which benefits key DIA components Chevron (6.36%) and Exxon Mobil (6.32%).

SPY-S&P 500 Depository Receipts – CME futures contracts traded below 886 before rebounding to 899 by 6:55 AM.

XLV Health Care Select Sector SPDR –Fitch Ratings issued a negative outlook for the US Healthcare sector yesterday with a bearish view on  pharmaceutical companies  and for-profit hospital operators and a stable outlook for medical device makers.

GLD -SPDR Gold Shares – Gold traded up to as much as $8.85, or 1.1%, to $819.45 an ounce and traded at $813.23 by 8:58am on the LME.

OIL iPath ETN Crude Oil – NYMEX contracts traded as high as 45.93 this morning on comments by Saudi Arabian Oil Minister Ali al-Naimi on anticipated OPEC production cuts.

EWG – iShares Germany – Germany’s Ifo Institute predicts the German economy will shrink 2.2% in 2009 and continue into 2010. The DAX is trading flat this morning, up 8.52 points, or 0.18%, at 4806.48.

EWH –iShares Hong Kong – The Hang Seng closed flat to 36.16, or 0.23%, at 15,613.90.

FXI –iShares China – The CSI300 closed down 2.39% to 2046.34. Consumer prices rose 2.4% in November from a year earlier, after gaining 4% in October.

Short ETFs

EWU – iShares United Kingdom – The FTSE100 is trading slightly up this morning, 0.57% at 4,393.46. The economy contracted 0.5% in the third quarter and the BOE predicts further contraction next year.

UUP – U.S. Dollar Index –The dollar fell to 1.3158 EUR this morning, the lowest level since October 20, while the pound rose to 1.4966 USD from 1.4785 yesterday.

FXY – CurrencyShares Japanese Yen Trust --The dollar weakened to 92.24 JPY in trading this morning while the Euro rose to 121.02.

EWY- The Bank of Korea Governor Lee Seong Tae and his board reduced the seven-day repurchase rate by one percentage point to 3% in Seoul today, the lowest since the bank began to set a policy rate in 1999.

IFN-India’s wholesale inflation rate fell to a seven-month low, suggesting further central bank rate cuts. Wholesale prices increased 8% in the week of November 29th from a year earlier after gaining 8.4% in the previous week.


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