Hustle While You Wait - asset allocation013009

“Everything comes to him who hustles while he waits.”
-Thomas Edison
The Chinese stock market has been closed all week for the Chinese New Year – the Year of The Ox. Leaders born in the Year of the Ox are patient, speak little, and inspire confidence in people. The glory days of the reactive crackberry data point managers are waning. Obama should think twice about promoting that perceived risk management device. It can polarize your thoughts.
I always tell my team that sometimes the best decision they can make in their stocks is to do nothing. This certainly doesn’t imply that they should work less hard. It most definitely suggests that they should focus on working smarter. Thomas Edison’s process and track record speaks for itself – you can indeed hustle while you wait.
I sold into CNBC’s crackberry “breaking news rally” on Wednesday because it was based on hope. Hope is not an investment process – particularly when driven by a producer/preacher who is paid to be perpetually bullish. Fortunately, I took the Cash position up in our Asset Allocation model to 82% on that move, and now I own the liquidity I need to take advantage of this manic media’s colossal misinterpretation of an “event” that has yet to occur.
On weakness I’ll be a buyer, but a patient one. The US Dollar continues to rise this morning and this will continue to pressure commodities and US stocks alike. Remember, without a breakdown in their dollars, Americans will be paid to save them, rather than invest them – as the bond market breaks down, yields on cash savings continue to climb. I invested 3% of that cash yesterday in Brazilian equities. Now I have a 79% position in cash, which on a day like yesterday helped me close up on the day – during an Illiquidity Crisis, cash remains king.
Not all cash is the same however – ask Europe’s levered long wanna be power broker, Vladdy Putin, what’s in his wallet? The Ruble is getting pounded this week, and falling to its lowest level in 11 years. The Russian Trading System Index, meanwhile, continues to wallow in concert with the world’s ‘no more KGB boy’ in my portfolio vote, trading down again this morning to 529. This is the only major stock market in the world that is trading below its October/November Liquidity Crisis lows. What we have now folks, is a failure to communicate – for those having their own Illiquidity Crisis that is… marking your levered long positioning to market is a nasty de-leveraging process. That’s the ruble; that’s Blackstone; that was Lehman Brothers.
Those investors who bought into the idea that the “Bad Bank Bailout” was going to warm the hearts and minds of those group-thinking financial czars in the Swiss Alps have to think that through now, all weekend long… and yes, that’s going to be a painful mental exercise. Hustling to buy the futures on Wednesday didn’t pay. Since the US market trades on price momentum, forced buyers turned forced sellers will be forced to do the required reading on what actually happened to 747 US banking thrifts between 1 (they went to zero).
We don’t need “no drama” Obama to remind us that some people in our business behaved “shamefully.” C’mon Man, this isn’t new. Some people on Wall Street have always behaved without responsibility. The only difference between now and then are that the rules of the game are changing – transparency and accountability will rule as we re-regulate those who need to be regulated. If you are someone, as the frenchie goalie in Paul Newman’s “Slapshot” said, “gets de penalty… and has to go to de box for 2 mee-nutes… and feel shame.” Guess what? You are finally going take that long overdue time off in the sin bin.
The #1 story on Bloomberg this morning is titled “Wall Street Bonuses May Go By The Way of The Dodo.” The WSJ is breaking news that both Morgan Stanley and Goldman are getting ready for another round of job cuts. I have the Street firing out their resumes into my system faster than NYC reporters chased Madoff back into his apartment. This is The New Reality. Wall Street is going to be rebuilt. Everything starts with a handshake and trust.
Corporate Executives of America, who aren’t yet working for state government enterprises, my advice to you is this: stop trading your expense line for your personal compensation structure – just stop. Take a step back before you make your next round of job cuts and think. If you didn’t think when you decided to build capacity at a cyclical top, or God forbid buy back your stock at the same time – now is your time to not make the same mistake twice. Just stop. Think about what you are doing. Proactively manage your business. If you don’t, my research team will You Tube you.
Companies that fit the bill on the fiduciary mismanagement of their shareholder’s capital and livelihood of their workers beware. In the past few weeks I have added Caterpillar, Coach, and Target to the list of those that should feel shame on this score – these guys all bought the top and are now selling the bottom. This isn’t just about Wall Street – this is about America. Wall Street has taken their turn with the flashlights in their eyes. Corporate America  - you are next.
If the SP500 breaks the 839 level, I have 804 as next support. Be patient, and wait for your opportunities. That’s what winners do. This is purely a Darwinian exercise at this stage of the game. The strong will get stronger – and remember, “everything comes to him who hustles while he waits.”
Have a great weekend.

Hustle While You Wait - etfs013009