Be The Change

“Be the change that you want to see in the world”
-Gandhi

On October 9th, 2007, the S&P 500 was trading at 1,562. It “was global this time” and oh boy was it levered up long. Tomorrow all of the said geniuses of “Investment Banking Inc.” can celebrate the anniversary of what was the most hyped global stock market mania in world history.

Having been in print with this call since November of 2007, I do not have to feel shame this morning like some should. I have been reading some quarterly hedge fund letters this week, and it’s almost as if they want you to believe that this is all “ok”, because “everyone missed this.” Surely, after the S&P 500 has lost -36% of its value, plenty of people did, but who should pay for the cardinal money management sin of not proactively preparing for risk? The client?

I quoted Gandhi this morning because some of these said “market savants” may very well need an alternative spiritual vehicle to find resolve. For those who didn’t allocate a healthy percentage of their assets to cash, prayer may very well be all that’s left. On 9/19/08 I made the call for a stock market crash (“Beware October 3rd, 2008”, www.researchedgellc.com), so I don’t have to sit here and feel bad about this. Since that call, the S&P 500 has dropped -21%. That’s not a victory lap. That’s the math.

The market has been down now for 5 days in a row. Dropping 15%, this puts the crash in the top 3 largest 5 day drops in US market history. Yesterday, today and tomorrow are days that you should be buying stocks, not yelling at one another, and pointing fingers. That’s what losers do.

Yesterday I moved our Portfolio to the following allocation: Cash 79%, Stocks 18% stocks, and 3% Gold. Today, I’ll be selling my yellow rocks and upping my allocation to stocks. This will be done at a measured pace. There is no reason to be running right now. This is what capitalism is; being proactively prepared to seize opportunity when your competition is most vulnerable. That’s not my or Gandhi’s religion. That’s called winning.

What we need here is some leadership, and I for one am not going to bury my head for the sake of looking “humble”, and hide on you today. I was up at 4am, and my investment team was in this office by 530am. We may not be as smart as the said “hedgie” masters of the universe. Some of them will be the first to tell you as much… but we will outwork them, and we do have a plan this morning. It’s the same plan we had yesterday. The only facts that have changed are prices. They are lower. BUY STOCKS.

The US Federal Reserve is going to cut rates and drop money from the heavenly skies this morning, so at least the predictable has occurred. Asian stocks markets crashed overnight, but the issues in international markets are not new to you if you have been reading anything we have been saying for the past 9 months. The British are issuing a $87B bailout program for 8 of their banks. The Russians and Indonesians have halted trading in their respective socialist stock markets. The South Korean Won dove -5.1% leaving it at below its level it saw during the Asian Crisis in 1997-98. Stock markets from Egypt to Austria are down -12 and -9%. The “carry trade” in the Yen is ending, swiftly, and wiping out hedge funds, globally. They are de-leveraging in unison at the bottom. BUY STOCKS.

Merrill Lynch is downgrading the transportation stocks this morning. This is despicable. Where were these bankers and brokers in October 2007? Why weren’t their bosses dialing up their buddy Chris Cox as the SEC getting a ban on long buying?? Unfortunately (for him), Ken Lewis at Bank of America is choking on that compromised and conflicted banking/brokerage unit this morning. His stock got priced at $22 last night, down from $38 at the beginning of the month! That’s a -42% drop. John Mack’s Morgan Stanley is down -28% since that same day. Short selling was banned – where are the evil doer short sellers now? Who are you guys going to point fingers at this morning? Get a mirror.

If you sense an aggressive tone in my key strokes this morning, you should. These said leaders of ‘Investment Banking Inc.’ should be sold short to zero. They took care of themselves before the client. Marcus Goldman is rolling in his grave this morning. He’d have advised the same; it’s time to BUY STOCKS.

Replace their definition of transparency and accountability with some advice that will be here for you when it matters most. We’re here for you. We’ve been winning our whole lives, and we’re not going to stop now. Game time starts in 1 hour and 30 minutes. “Be the change that you want to see in the world.”

KM



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