“If you’re not confused, you’re not paying attention.”
-Tom Peters
When Tom Peters wrote “In Search Of Excellence” in 1982, this country was looking for answers - and it was looking for change. His primary focus was on leadership, and getting back to a corporate America that inspired individual capitalistic instinct as opposed to the burdensome corporate overhead culture that had dominated the times. Sound like a remedy for all that ails American leadership today? That’s a rhetorical question. Groupthink sits at the top of my league table of where this country went wrong in 2008.
How many times do we have to pick up a newspaper or listen to one of the financial media network’s interviews of the said savants of the American financial system and read or hear the following: “I’m not an economist… I don’t have a crystal ball… I don’t think anyone saw this coming…” It’s really tiring and pathetic altogether. The reality is that there were plenty of people in the room who raised their hands and/or proactively predicted that this movie wouldn’t end well – but the said leaders of our largest companies, endowments, and government regulatory institutions didn’t listen.
It’s very easy to get “confused” if you hear but don’t listen. I think my Dad told me that when I was 3 years old. While that’s close to the age of Paulson’s appointed “Director of Financial Stability” program’s business career on Wall Street, it’s also a very basic thought process. At the peak of this reactive management culture we have built, the crackberry became king. The money became the reward. Now, it’s time to listen, turn it all off, and change.
Obama is making two more very important changes to the USA’s leadership lineup this morning by appointing David Tarullo to the Federal Reserve and Mary Shapiro to be the new head of the SEC. Yesterday I was saddened while I watched the current SEC groupthink head, Chris Cox, and Bernie Madoff, chased around by the manic media. One of these said leaders oversaw the doings of the other – everyone was getting paid to “not pay attention.” We can drag Arthur Levitt and every other ex-SEC chief onto the You Tube mats this morning and next, you’re not going to get any other answer from them than a narrative fallacy. There is no accountability in that - it’s time for change.
Change is good, and at least rhetorically, “no drama” Obama is going to expedite it. Like my paying attention to the leadership at Lehman, Goldman, and Morgan Stanley over the course of the last 10 years, the Democrats have been taking pretty good notes. No matter what your politics, Obama is right on espousing the American principles of transparency, accountability, and trust – that’s why over 70% of adults polled (Republicans too) are “optimistic” about the President Elect’s opportunities. The opportunity for change has never been more obvious – not because Obama and I have been so right on our “calls” in 2008, but simply because the people we have been ‘You Tubing’ have been so glaringly wrong.
Back to making the daily “call” on global markets… this morning reflects more of the same. Asian stock markets continue to build confidence on the back of Chinese capitalistic actions, and that lonely ole dark hole of October/November USA is starting to see shimmers of a global light. My view is that the balance of power in global economic leadership continues to shift. If the leaders of this country “don’t have a crystal ball”, why not find new ones that do – we have incorporated in Hong Kong and have men on the ground in Macau – they carry crystal blue Hedgeye orbs in their pockets. They get the Chinese news before most Americans do – mostly because they are on premise… but heh, the storytellers of Wall Street can call them my “Frodos” of finance, and I’ll be cool with that.
I don’t rain down on Bloomberg like I do CNBC, primarily because that would be dumb. Bloomberg generally sticks to the facts, and is smart enough to know what they don’t know. Bloomberg TV rarely has 8 people in boxes being queued by crackberry addicts and yelling at one another. Bloomberg seems to actually listen rather than hear.
That said, this morning my Chinese “Frodos” flashed me a headline story on Bloomberg this morning titled “Zhou stokes speculation – China poised for Rate Cuts”… pardon? We broke that news 3 days ago – “C’Mon Man!”
Since we have a process that I wake up to every morning (i.e. anything that’s new news in China is sent to my inbox by 3AM EST), maybe that’s why I haven’t been “confused” in 2008. I guess I haven’t been “paying attention” to the Street’s views, or stale and manic “breaking” reports of the narrative fallacy. The reality is that if you are paying attention to the right proactive risk management process, you have not been confused in 2008.
For now, it’s better to be on the buy side of the SP500, using a buying range of 867-890, and a selling range of . The facts are changing and they aren’t confusing. Volatility continues to dampen alongside low volume down days and higher volume up ones. Breadth is expanding alongside this country’s leadership changing – that’s a trading range that I can believe in. We are all in “Search Of Excellence”, not excuses. The time for change has come.
Best of luck out there today,
Long ETFs
SPY-S&P 500 Depository Receipts – Front month CME S&P 500 contracts traded as high as 909.7 in trading this morning before 7AM.
VYM -Vanguard High Dividend Yield –The FDA gave approval for a new zero-calorie sweetener, “Truvia” developed by Coca-Cola (VYM: 2.5%) and Cargill yesterday.
DIA –DIAMONDS Trust Series – Front month CBOT DJIA contracts traded as high as 8,861 in trading this morning before 7AM.
EWZ – iShares Brazil—Carrefour SA, Europe’s biggest retailer, plans to open as many as four new stores in Brazil. Lenovo Group, China’s biggest maker of personal computers, is in talks with Brazil’s Positivo Informatica over a strategic alliance.
EWH –iShares Hong Kong – The Hang Seng closed up in trading today at 15497.81, or 0.24%, led by developers on expectations China will cut interest rates and support the real estate market.
 FXI –iShares China – CSI300 closed up 2.18% at 2045.10. China cut fuel prices for the first time in almost two years in response to slumped crude prices. Gasoline slashed 14%, diesel by 18%, and jet fuel by 32%. Expectations of an interest rate cut following Chinese central bank Governor Zhou Xiaochuan’s reiteration yesterday of China’s low inflation number for November of 2.4%.
Short ETFs
FXY – CurrencyShares Japanese Yen Trust – The Yen fell to 88.69 per USD after Japanese officials signaled they may intervene in the foreign-exchange markets for the first time in four years.
Keith R. McCullough
CEO & Chief Investment Officer