The Liquidator - asset allocation012809

“What is a committee? A group of the unwilling, picked from the unfit, to do the unnecessary.”
-Richard Harkness
 
I haven’t had to ‘You Tube’ CNBC for a while now, but I guess all it takes is the first 3-day rally in the US stock market since November to remind us all how reckless some of these entertainers on our nation’s manic financial media network can be.  After all, most of the “traders” on Dillon Radigan’s “Fast Money” have never seen a bullish tape that they didn’t chase.
 
Unfortunately, this tape isn’t bullish, yet. Clearly, Dillon Radigan doesn’t proactively manage the process by which his “committee” of Fast Money group thinkers gets excited at immediate term tops and freak-out at immediate term lows, well… because… the man doesn’t have an investment process.
 
A wise man who taught me a great deal in this business once told me that it is better to be an idiot in this profession and remain silent, than to open your mouth in a meeting and remove all doubt. Last night, Fast Money’s Joe Terranova – the man they call “The Liquidator” – reminded me of as much. After (not before) this 3-day rally, this momentum trader of everything that goes up was firing his mouth off on being bullish on everything from Brystol Myers (thanks, we just sold into that), to energy stocks. Then he proclaimed his mystery of faith by asserting himself as a resident expert on what this “Bad Bank” proposal means – it was truly a professional embarrassment.
 
When someone who has no idea what they are talking about looks into one of these cameras and gives you that ridiculously serious stare that the producers of Fast Money order their performers to deliver, please watch your step. The only thing worse than an idiot giving you financial advice is an idiot who always has conviction.
 
The real “Liquidator” that you should be focused on this morning is the US Government. In a perverse way, the anteing up of larger and larger socialist stimulus plans and government bailout expeditions is going to be good for the stock market, at a price, in the very short term. Why is that? Well, quite simply because this has disastrous implications for both America’s balance sheet and her long standing leadership in having the world’s currency reserve standard. The more we show the world that we are willing to capitalize individual gains on Wall Street, and socialize the losses, the less the US Dollar will be worth.
 
There is a penalty for malfeasance, and yes the US Dollar can go down, a lot, as a result. In the immediate term, if the US Dollar breaks down and closes below the levels that I issued in yesterday’s missive, the stock market should continue to work higher. No, I am not saying this is good – and neither is General Electric’s AAA rating when you consider that they support the class action law suits waiting to happen with their said professional “traders”… it all ends very badly. But again, everything has a time and a price.
 
For generations, mismanaged countries have had to de-value their currency in order to dissuade their citizens to save. This, of course, encourages people to take on additional risk in order to find a relative return. Is it bad? You bet your Madoff it is… but try ramping the US Dollar up another +3-6% from here, and let me know how that feels in your stock portfolios.
 
The fact of the matter is that the US stock market’s only up month (December) since the Crisis of Credibility went into full swing, came in a month where the US Dollar broke down. If you’re more into the Fast Money thing, the first 3-day consecutive rally in US stocks came on the heels of a US Dollar decline as well. For the week to date, the SP500 is +1.6% and the US Dollar is down -1.7%. That’s as tight an inverse correlation as you are going to find. That’s just the math.
 
The worst part about this reactive government intervention is that it is being run by committee. Then we have the manic media interpret the reactive decision making with some of the most reckless advice I have ever heard. This is bad.
 
I ‘You Tubed’ the output of that new Obama committee via Larry Summers Meet the Press interview in a note to our macro clients earlier this week. The bottom line is that the stimulus package is going to be much larger than that $825B number, and Summers knows it. Page One of the WSJ this morning finally addresses my point, so Joey T will get that memo for his slapstick punditry on tonight’s show. He’ll only be 3 days late.
 
Joe, sorry to steal your high conviction thunder, but your stage name, “The Liquidator” is owned by one Resolution and Trust Corporation. This “Bad Bank” idea is somewhat similar in scope to what the US government implemented during the Savings & Loan Crisis. Don’t forget that between 1, this US government owned asset management company, closed/dissolved 747 thrifts (banks) with assets of almost $400B – yes that’s beelions – and no, it didn’t end well for shareholders of last resort. That’s a “Liquidator”!
 
The politicized US Federal Reserve will be front center later today with an FOMC decision that has been compromised. When you cut rates to zero, the only thing left to do is implement emergency bailout plans, and get Fast Money traders in heat trading the futures. With the US futures spiking higher last night, and CNBC promoting it with a live chart, I sat there in wonderment trying to think of how many times the American public has to see this hope-fest of entertainment better suited for the E! channel before she finally understands that this network has virtually been wrong in leading you to buy into these bailout plans at every turn…
 
GE’s stock goes down for a lot of reasons, but why is the obvious fact of liability in their media portfolio so deceptive? Don’t ask Radigan’s “committee” – this is a group “picked from the unfit, to do the unnecessary.”
 
In the immediate term, the SP500 range of 861 to 873 will be very much overbought. Unless the US Dollar breaks down, you are best served liquidating longs today into strength, rather than listening to the man formerly known as “The Liquidator.”
 
Best of luck out there today.

The Liquidator - etfs012809