“The amount of money in both these pots may not be enough to solve the problem”
-Alan Greenspan (February 2009)

What has become of American Capitalism when the only thing market pundits and former maestros alike can find as a solution is government handouts?

While I can write depressing books about being as bearish as I was at this time last year, or point fingers and whine about yesterday’s reaction to the US government’s stimulus plan, don’t expect either from me. I am a capitalist, and I will not stoop to this shameless level of manhood. It is unbecoming, irresponsible, and un-American.

Fortunately, I proactively prepared for this final selloff, and had our clients in a recommended 76% cash position going into yesterday’s open. So what? What does that do for me today McCullough? Well… For one, it allows us to stay in the game here – it also provides us the unique opportunity to buy low – and that’s what real American capitalists who have a repeatable investment process have always done. So let’s roll up our sleeves here and be accountable. Blaming Obama for all of this is a loser’s excuse.

Loser? Yes folks, if you haven’t noticed, there are a lot of world class losers out there who are pretending to be fiduciaries of the American economic system. I am tired of hearing their excuses. The time has come to stop putting our country in the hands of their horrendous judgment.

There are plenty of American Capitalists out there who still understand the value of their principles, and trust their counterparty’s handshakes. They don’t need leverage to earn a return, and they certainly would rather roll over into a hole 6 feet under than attempt to socialize the losses associated with their personal mistakes.

Capitalizing individual profits and socializing losses is not the America I want to raise my son in. It’s a pathetic Code of Conduct, and it’s time to stop being charitable to these people who have proven to have behaved willfully blind. Between Rick Wagoner at General Motors asking for another $17B, the government of California looking for $14B, and some billionaire loser by the name of Allen Stanford in Texas committing another $43B Madoff yesterday, we have no reason to trust what was … what was is behind us now… and we have to find the right people who can step up, be accountable, and move this country forward.

If you don’t want to read the rest of my riff, you should probably stop here. On this topic of Code of Conduct, one of our consultants in the field, Dirk Blum, made an important observation this past weekend. Without paraphrasing his words, I’ll give them to you in full. After interviewing a retired US Army Officer, this was what Dirk had to say about his discussion with one of America’s finest:

“It seems like any decision get’s consideration so long as it is legal… at which point the US Army Officer jumped in and said “well that’s why we had conduct unbecoming”.

He was referring to Article 133 of the Uniform Code of Military Justice, which states that: “Any commissioned officer, cadet, or midshipman who is convicted of conduct unbecoming an officer and a gentleman shall be punished as a court-martial may direct.”

The essence of this article is that, only because an officer doesn’t violate any of the other Articles of the UCMJ, that doesn’t mean that he is displaying the conduct expected of a uniform officer of the United States.  You get cute or passive aggressive with another officer, guess what, that’s conduct unbecoming.  You shame the uniform in any way, guess what, that’s conduct unbecoming.

According to a reference to the Navy-Marine Corps Court of Appeals (check the Wikipedia entry), Article 133 refers to an officer and gentleman, because a gentleman is understood to have a duty to avoid dishonest acts, displays of indecency, lawlessness, dealing unfairly, indecorum, injustice, or acts of cruelty.

How many of the executives that we have all gotten to know so well over the past year can truly say that about themselves?”
-Dirk Blum

Now Dirk graduated from Dartmouth, worked in Washington and Baghdad, and now lives in China. He has one of those simple attributes that a lot of Americans appreciate – global perspective. What America has been doing over the course of the last 12 months has been You Tubed by the world, and guess what, we are now ALL accountable for it.

So let’s stop pointing fingers this morning and step up and conduct our respective businesses in a way that is becoming of this great American flag.

Yesterday, I invested 9% of that 76% position I was carrying in US Cash, taking my Asset Allocation Model’s Cash position down to 67%. I bought American and I bought Chinese. On the International Equity side, we now have a 3% position in the Morgan Stanley China Fund (CAF) and a 3% position in Brazil via the EWZ etf. Being a successful American Capitalist in 2009 and beyond will require us to fortify partnerships with foreign buyers. We need to make our handshakes mean something again. That is The New Reality. Protectionism has always been a loser’s game.

With the SP500 closing at its lowest level since the November 2008 capitulation, the US market has yet to make lower lows. My call has been, and continues to be, that we will not close below that 752 low.

I don’t want bailout money. I don’t need a politicized Washington “economist” to tell me what to do with my family’s hard earned capital. All I want is the economic freedom to succeed or fail. My name is Keith R. McCullough, and I am accountable for every call I make.

Best of luck out there today,

Conduct Unbecoming - etfs011809