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Ike's Bluff (Book Review)

Takeaway: A great rewind of uniquely American-style Presidential leadership - buy the book.

Summary Thoughts


  1. Inspirational book on judgment and accountability in decision making
  2. Sharp contrast to the broken #PoliticalClass concepts of leadership in America today
  3. His greatest victories were the wars he did not fight” –Evan Thomas #indeed


Content Highlights


  1. “Eisenhower was the first President to use TV as a bully pulpit, but he was not particularly good at it” (pg 16) #authenticity
  2. “The people, judging from Eisenshower’s high poll ratings, believed that he had sound judgment” (pg 16)
  3. “too many cups of coffee, smoked too many cigarettes, slept badly, and worried far too much.” (pg 18) #accountability
  4. “He knew that he had a gift: the power to make people – indeed, whole peoples – trust him” (pg 28) #trust
  5. “His firstborn child… “Icky”, died of scarlet fever in 1921… and he never really recovered from the loss” (pg 30) like #Jefferson
  6. “Eisenhower had grown up poor in Abilene, Kansas” (pg 33) #perspective
  7. “President Eisenhower’s day usually proceeded with the precision of a military band.” (pg 43) very #process/routine oriented
  8. “Let’s not make our mistakes in a hurry” was one of his standard sayings.” (pg 45) very #patient, risk manager of a man
  9. “Never get in a pissing match with the skunk” (pg 57) to his brother Milton about #McCarthy
  10. “What we found was the result of seven years of yapping was exactly zero. We have no plan.” (pg 59) Ike on #Stalin’s death
  11. “Miss America contestants were asked to state their opinion of Karl Marx” (pg 69) #1950 zeitgeist in America during Korean War 
  12. “More significant was the death of Stalin, the leader most responsible for the conflict” (pg 81) good chapter contextualizing Korea
  13. “The war is over and I hope my son is coming home soon” (pg 81) wars different vs recent US Presidents; #personal responsibility
  14. “Learning To Love The Bomb” (pg 101) Chapter 7, illustrates how politicians in America marketed/sold #fear
  15. “we live by emotion, prejudice, and pride” (pg 105) Ike in an excellent leadership note to #Churchill
  16. “Eisenhower, himself a heavy editor, fiddled with his speeches until the last possible moment” (pg 111) #accountability
  17. “You’ve got to stick your butt out more, Mr President” (pg 115) loved #golf, this was advice from Sam Snead at Augusta
  18. “Eisenhower was astonished at the foolishness of the French” (pg 120) annoyed w/ France at Dien Bien Phu #Vietnam
  19. “You have a row of dominos set up, and you knock the first one over” (pg 127) why he kept USA out of Vietnam #1954
  20. “Eisenhower was an expert in finding reasons for not doing things” (pg 130) –Andy Goodpaster, his Staff Secretary
  21. “Scientists and industrialists must be given the greatest possible freedom to carry out their research” (pg 146) #evolve
  22. “Don’t Worry, I’ll Confuse Them” (Chapter 10) fascinating #strategy chapter on how he’s play the Chinese
  23. “Chiang might have dragged out the crisis had the Red Chinese not backed down. But they did.” (pg 164)
  24.  “Eisenhower had read Clausewitz’s On War – three times” (page 203) #study
  25. “This fellow’s licked and what’s more he knows it” (pg 209) Ike on Adlai Stevenson’s challenge for the Presidency #1956
  26. “icy with anger, warm with satisfaction, sharp with concern” (pg 215) when Ike learned of the #U2 intelligence on Russia
  27. “A crisis in leadership” (pg 255) that’s what Time Magazine said about Ike in #1957, #embarrassing editorial times
  28. “The President must be in some kind of partial retirement” –Walter Lippmann (pg 255) #1957, not knowing what Ike knew
  29. “You can understand that there are many things that I don’t care to allude to publicly” –Eisenhower (pg 260)
  30. “Patience and privacy were virtues of leadership, vices of politics… he was the lonely keeper of the nation’s secrets” (pg 260)
  31. “Psychologically, he could handle the pressure. But physically, he could not” (pg 260) I get it
  32. “The Roman Empire controlled the world… Now the communists have established a foothold in outer space” –#LBJ! (pg 276)
  33. “Ike, who regarded LBJ as a phony” (pg 277) Life Magazine put Lyndon Johnson on the cover, Russian space #FearMongering
  34. “Alsop did what newsmen do: he found other sources. One was Johnson, who cultivated Alsop” (pg 310) gotta love #NYTimes
  35. “Eisenhower was, in effect, his own secretary of defense” (pg 314) #experienced practitioner, not political parrot
  36. “honesty of purpose, calmness, and inexhaustible patience” (pg 331) Ike, on himself, and virtues of #leadership
  37. “Khruschev was surprised and overjoyed to be invited to America by Eisenhower” (pg 335), keep your #enemies close
  38.  “He found her and crawled in beside her” (pg 352) Eisenhower’s best friend, his wife #Mamie
  39. “I’m Just Fed Up!” Chapter 25, classic – U2 crisis blows up with Russia/Khruschev; Eisenhower diffuses the risk, again
  40. “Ike was more comfortable as a soldier, yet his greatest victories were the wars he did not fight” (pg 404) #conclusion


A great rewind of uniquely American-style Presidential leadership - buy the book.



Keith R. McCullough
Chief Executive Officer

Destroy The Currency, Boost The Market

Japan and Venezuela have enjoyed massive gains in their respective stock markets over the last year. Venezuela's IBVC Index is up over 30% year-to-date while Japan's Nikkei 225 is up almost 20%. Comparatively, the S&P 500 is up a little over 9.0%. These two countries have seen their the value of the Japanese Yen and Venezuelan Bolívar drop considerably since last year. Debauched currency = rising stock market. 


Destroy The Currency, Boost The Market - image001

Stock Report: Darden Restaurants (DRI)

Stock Report: Darden Restaurants (DRI) - HE II DRI 3 30 13


We have been writing for several quarters of our belief that Darden’s multi-brand portfolio is inefficient and, far from achieving the economies of scale that management touts, has led to subpar cash return on investment.  


Following our call to short the stock in July of 2012, we saw a depreciation in the stock price and a general consensus emerge among the investment community that fully bakes in our negative views of the company’s fundamentals.  


At this point, we believe that the potential for improvement at Darden is too great, and the mismanagement so egregious, that it is difficult to imagine either activism in the shareholder base or management offering a mea culpa and following a more prudent strategy with respect to capital allocation.  In either scenario, the stock should appreciate and $1 billion in EBITDA makes the dividend yield safe and, we believe, supports the stock in the mid-to-high $40’s valuation range. 


INTERMEDIATE TERM (the next 3 months or more)

Over the intermediate-term, we believe that sequentially improving restaurant trends within the casual dining industry should provide support to Darden’s same-restaurant sales results.  Darden’s blended “Big Three” (Olive Garden, Red Lobster, LongHorn) sales will almost certainly continue to lag the industry, but until management, willingly or otherwise, attacks the middle of the P&L, we believe a true turnaround will take some time.


LONG-TERM (the next 3 years or less)

The long-term is where there is real upside in Darden.  This kind of opportunity does not arise in this space on a regular basis.  Darden’s operating margins are in line with Brinker’s while its restaurant-level operating margins are 400-500 bps wider; we see this as indicative of a corpulent cost structure at Darden.  


By our estimation, $293 million could and should be cut from SG&A, adding roughly $1.40 per share in EPS or $20 of share price upside.  Combining this with the difference between our sum-of-the-parts valuation ($67) and the share price, we see roughly $33 of upside in the stock. 


Stock Report: Darden Restaurants (DRI) - HE II DRI chart 3 30 13

Daily Trading Ranges

20 Proprietary Risk Ranges

Daily Trading Ranges is designed to help you understand where you’re buying and selling within the risk range and help you make better sales at the top end of the range and purchases at the low end.

Tired? SP500 Levels, Refreshed

Takeaway: In other words, the all-time highs remain in play, but so does some very short-term mean reversion (to 1532). We want to be flexible here.



I sold the open this morning (sold 2 LONGS, added 2 SHORTS) because the bottom up signals in each security told me too. The SPY didn’t register a sell signal (it usually doesn’t until after stocks do). The market has been up for 9 of the last 10 weeks; certain stocks are getting exhausted.


Exhaustion can last (think the 1995 US stock market), particularly if the research fundamentals support it (they do). So don’t expect me to get too cute here. This remains a market we want to be risk managing with a bullish bias, until something (signal or research) changes.


Across our core risk management durations, here are the lines that matter to me most:


  1. Immediate-term TRADE overbought = 1565
  2. Immediate-term TRADE support = 1532
  3. Intermediate-term TREND support = 1477


In other words, the all-time highs remain in play, but so does some very short-term mean reversion (to 1532). So we want to be flexible here. Keep moving and don’t get plugged buying on overbought signals.




Keith R. McCullough
Chief Executive Officer


Tired? SP500 Levels, Refreshed - SPX


March is off to a bang with average daily table revenues (ADTR) up 34% YoY for the first 10 days.  The numbers are skewed higher a little because the period contains 2 weekends of data.  We are upping our full month forecast from 10-15% growth to +12-17%.  Our initial growth projection was based on historical sequential seasonal patterns and an easy hold comp over last year.




The word around town is that hold percentage is likely running higher than normal.  We had received reports last week that traffic on the Mass floors was a little light.  ADTR is likely to moderate the rest of the month.


SJM outperformed to start the month mostly at the expense of Wynn.  The other operators are tracking fairly close to recent trend. 



Morning Reads From Our Sector Heads

Todd Jordan (GLL):


-Hotel chains boost loyalty point requirements to book a free room (via LA Times)


Rob Campagnino (Consumer Staples):


-Vietnam Coffee Harvest May Drop 30% on Drought, Vicofa Says (via Bloomberg)


Kevin Kaiser (Energy):


-Oil sands firms move on cutting costs (via Globe and Mail)


Howard Penney (Restaurants):


-$DRI is back with its 2 for $25 Italian Dinner 3 Courses/2 People/Just $25 - and this is going to help traffic? (via Olive Garden)

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