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"I did envisage being this successful as a player, but not all the hysteria around it off the golf course."
-Tiger Woods
I had the privilege of playing golf yesterday afternoon with one of the most thoughtful investors I have met in this business. As we we're having a few post game refreshments, he made a very simple point - "isn't it great to not have to always be checking your blackberry?"
I don't use a crackberry (when I left Carlyle's hedge fund in 2007, I actually gave it to my son Jack to gnaw on). Away from this game of daily risk management, there is a perpetual hysteria that dominates Wall Street/Washington's groupthink. This is an operating culture that we created. As my good friend pointed out on the 10th hole fairway yesterday, "its really just a function of this business becoming all about size and scope."
Bigger, as we have learned, is no longer better. Bigger, in many cases,  creates stagnation. Bigger, doesn't allow one to change as the facts are changing . If you want to invest successfully in an increasingly interconnected global market place of interacting factors, you have to be able to move.
What if you can't move? Well, Tiger Woods reminds us that that's precisely when you should proactively change what you are doing. Woods has completely shelved his entire golf swing 3 times since he came pro. I wonder what his reaction would be to the idea that someone playing Wall Street's game HAS TO BE fully invested!
When investors HAVE TO BE something, creative destruction takes hold. Timmy Geithner and De Banking Club aside, this is America don't forget. Most capitalists I have met in my life, don't HAVE TO do anything other than have the mental flexibility to change and keep looking for new ideas.
Today's market is dominated by investors HAVING TO HAVE a risk management process, because the one they told people they had didn't work. Every day you can almost feel the need for analysts and investors alike to HAVE TO make calls on bubbles. Everyone is a bubble watcher, AFTER they blew up in one - now that's progress!
Today's US market reality is this:
1.       The US stock market is consolidating for its next real move

2.       Volatility (VIX) has been smashed

3.       Volumes have dried up to the bone

As a result, while everyone is running around investor conferences trying to figure out where the Great Depression narrative went. Chinese demand is accelerating and so are the prices of the things that they (The Client) need.
In the face of plenty an energy all-star telling us that oil's move "isn't fundamental", the US Dollar continues to fundamentally break down and spike that price of oil to higher-highs. Meanwhile, Dr. Copper is hitting a new YTD high this morning as well, trading up to $2.40/lb, taking its YTD performance to +65%.
The Client (China) needs oil and copper. That, bear friend British Philosopher, is "fundamental". HAVING TO tell your investors that everything you get right in this business is "fundamental" while everything that goes against you isn't based on fundamentals is , sadly, what some asset management structures that are too big to move HAVE TO say.
The Client (China) doesn't HAVE TO buy any more US Treasuries. The Client doesn't HAVE to ignore Russia's handshake. The Client doesn't HAVE TO do anything.
The US stock market doesn't HAVE TO crash right here and now. The US stock market doesn't HAVE TO have another +40% short squeeze. The US stock market's winners in 2009 don't HAVE TO do anything.
In the intermediate term (3 months or less), I think we're moving into one of the more predictable trading ranges that we have seen in years. No, I don't HAVE TO trade it - but, for now, I will...
My immediate term upside target for the SP500 is +2% from yesterday's 939 close. My downside support target is -2% lower, at 922. Play the game, and capitalize on the consensus hysteria. Crackberry updates are a lagging indicator.
Best of luck out there today,


QQQQ - PowerShares NASDAQ 100 - We bought Qs on 6/10 as a better way to be long the US market than the SP500. The index includes companies with better balance sheets that don't need as much financial leverage.

EWA - iShares Australia- EWA has a nice dividend yield of about 5% on the trailing 12-months.  With RBA rate cuts showing signs of working and a commodity based economy with proximity to China's reacceleration, there are a lot of ways to win being long Australia.

FXA -CurrencyShares Australian Dollar Trust-Thanks to recovering Chinese demand for commodities, the sure handed management of RBA Governor Glenn Stevens and comparatively modest consumer debt levels -Australia's GDP continued to expand in Q1 while other industrialized economies saw double digit declines.  As with Canada, we like the Australian economy as an offset to the toxic US balance sheet.  

XLV - SPDR Healthcare -Healthcare looks positive from a TREND duration. We bought XLV on 6/08 to get long the safety trade.

EWC - iShares Canada - We want to own what THE client (China) needs, namely commodities, as China builds out its infrastructure. Canada will benefit from commodity reflation, especially as the USD breaks down. We're net positive Harper's leadership, which diverges from Canada's large government recent history, and believe next year's Olympics in resource rich British Columbia should provide a positive catalyst for investors to get long the country.   

XLE - SPDR Energy - We bought Energy on 6/05. We think it works higher if the Buck breaks down.  Bullish TRADE and TREND remain.

CAF - Morgan Stanley China Fund - A closed-end fund providing exposure to the Shanghai A share market, we use CAF tactically to ride the wave of returning confidence among domestic Chinese investors fed by the stimulus package. To date the Chinese have shown leadership and a proactive response to the global recession, and now their number one priority is to offset contracting external demand with domestic growth.

TIP- iShares TIPS - The iShares etf, TIP, which is 90% invested in the inflation protected sector of the US Treasury Market currently offers a compelling yield on TTM basis of 5.89%. We believe that future inflation expectations are currently mispriced and that TIPS are a compelling way to own yield on an inflation protected basis, especially in the context of our re-flation thesis.

GLD - SPDR GOLD -We bought more gold on 5/5. The inflation protection is what we're long here looking ahead 6-9 months. In the intermediate term, we like the safety trade too.


SHY - iShares 1-3 Year Treasury Bonds - If you pull up a three year chart of 2-Year Treasuries you'll see the massive macro Trend of interest rates starting to move in the opposite direction. We call this chart the "Queen Mary" and its new-found positive slope means that America's cost of capital will start to go up, implying that access to capital will tighten. Yields are going to continue to make higher-highs and higher lows until consensus gets realistic.

UUP - U.S. Dollar Index - We believe that the US Dollar is the leading indicator for the US stock market. In the immediate term, what is bad for the US Dollar should be good for the stock market. Longer term, the burgeoning U.S. government debt balance will be negative for the greenback.

 XLU - SPDR Utilities - As long term bond yields breakout to the upside, Utility investments are the relative yield loser.

EWW - iShares Mexico - We're short Mexico due in part to the repercussions of the media's manic Swine flu fear.  The country's dependence on export revenues is decidedly bearish due to volatility of crude prices and when considering that the country's main oil producer, PEMEX, has substantial debt to pay down and its production capacity has declined since 2004. Additionally, the potential geo-political risks associated with the burgeoning power of regional drug lords signals that the country's economy is under serious duress.