This note was originally published at 8am on July 22, 2011. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.

“The ignorant man marvels at the exceptional.”

-George D. Boardman

George Boardman was an accomplished American man from Maine. Graduating in 1822, he was Colby College’s first graduate. He had exceptional success as a global missionary.

Most of the people I know who accomplish great things in this good life don’t marvel at their accomplishments. They wake up every morning expecting it of themselves. They also expect adversity. In fact, most of them can’t live without it.

Yesterday was an Exceptional Day for Europe. I, for one, got royally squeezed in my European shorts by it. After going through the wringer on plenty of these centrally planned short squeezes since 2008, I’ve stopped marveling at them. This is what the Fiat Fools do. Whether it was TARP in 2008 or what you saw yesterday, short-term volatility only perpetuates the long-term problem.

Members of the European Keynesian Kingdom (EKK) emerged from their 3 hour lunch yesterday with a statement that Greece needed an “exceptional and unique solution.”

Then, they offered the bankrupt nation $229 BILLION in new aid (~75% of GDP!)…

Then, they spent the rest of the day gloating about their short-term political success…

That’s what professional politicians promising the arrest of gravity do.

Germany’s leader of Short-Termism, Angela Merkel, emerged from the meetings in Brussels proclaiming her mystery of faith saying: “I am satisfied with the outcome because the euro countries showed today that we are up to the challenge, we can take action.”

True, Mrs Merkel – for a day. But what shall you do tomorrow? Another European summit? How about next week? Any plans for August?

In all things risk management tomorrow starts today. Rather than marveling at your wins or loses, you’re job is to put on the trades today that will position you to not lose money tomorrow. Being awestruck by an exceptional market move can freeze you. Don’t let that happen. Out of sight, out of mind – onto the next.

My short-term performance problem in Europe yesterday aside, we had a great day on the long side of everything we’re long in US Equities. Covering my short position in the SP500 on July 5thhas allowed me to broaden my horizons and move to our most invested position in Global Macro for 2011 YTD (drawing down my Cash position to 43%).

What that doesn’t mean is that I should be marveling at those gains. Given our Q3 Macro Theme of “Risk Ranger”, I should be selling some of my gross long exposure in the US today and adding to my short exposures in Europe. The core tenant of the Risk Ranger theme is implied in the name – manage your risk within proactively predictable ranges of market prices.

So let’s do that – in Global Equities here are the intermediate-term TREND ranges we plan to use in Q3, until the plan changes:

  1. USA – SP500 range of 1241-1377
  2. CHINA – Shanghai Composite range of 2629-2849
  3. JAPAN – Nikkei range of 9670-10227
  4. INDIA – BSE Sensex range of 17611-19409
  5. GERMANY - DAX range of 7075-7451
  6. SPAIN - IBEX range of 9251-10405
  7. ITALY – MIB range of 17614-20889
  8. GREECE – ATG range of 1151-1346
  9. BRAZIL – Bovespa range of 58521-63929
  10. CANADA – TSE range of 12811-13765

That’s it. There’s nothing exceptional about today or how we are going to manage risk around it. We have our intermediate-term strategy and, as we whip around both the US Debt Ceiling debate and European Sovereign Debt Crisis, we’re sticking to it. As you can see, not 1 of the top-side’s in our intermediate-term TREND ranges was violated to the upside yesterday.

My immediate-term TRADE ranges (different duration than the TREND) for Gold (we’re long, and we bought Silver yesterday too), Oil (no position), and the SP500 (no position) are now $1585-1619, $97.21-99.76, and 1319-1351, respectively.

Enjoy the storytelling of the Fiat Fools and, of course, an exceptional weekend,

KM

Keith R. McCullough
Chief Executive Officer

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