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“We’ve left our future largely in the hands of people whose single greatest characteristic is that they are bewildered by the present.”

-Joshua Cooper Ramo

I’m in the midst of reading Cooper Ramo’s, “The Age of The Unthinkable.” I’m halfway done, but ready to add it to the required reading list for anyone looking for an alternative solution to the Glaring Groupthink we have been witnessing on Wall Street and in Washington. We need our own alternative to what they try fear-mongering us into believing is the “alternative.”

While the Olympics inspired us to live with passion and pride, the challenge at hand for Americans will be to keep that fire of entrepreneurial spirit in our bellies. CNBC’s live Olympic coverage has been replaced with the backward looking anchors who didn’t see much of the crashes or the recoveries coming to begin with.

“Being bewildered by the present” is a great way to summarize what you think you are seeing in today’s financial and political leadership. Despite the SP500 moving back to positive for the year-to-date yesterday, we are waking up to another horrendous weekly consumer confidence reading of minus -49 from the ABC/Washington Post report this morning.

Politicians and reactive market strategists alike wake up Selling Fear. When I listen to some of these people and do a quick You Tube study of what they were saying at the levered-up highs of 2007 and the Great Depressionista lows of early 2009, I don’t blame them. They should fear whatever it is that gives birth to their bewilderment. These people don’t have a proactive analytical process. They never did.

So let’s lock arms and stop complaining about this. Last night veteran journalist Charlie Reese asked Americans to forward a well documented report card on our Congress titled “545 People.” While complaining is becoming consensus, it was one of the better vents I have read in a while.

Let’s stop letting those with Perceived Wisdom tell us what to think. In the spirit of Cooper Ramo’s conclusion – in ‘The Age of the Unthinkable’, it’s time to think for ourselves.

Now whether you sold the hope associated with the SP500 making its YTD high on January 19th (1150) or bought the Fashionable Fears associated with the February 8th YTD closing low (1057), you get the point. Let’s keep using those opinions who are “bewildered by the present” to our advantage. That’s a capitalism I can believe in.

Since the first week of February Freakout Lows, here’s what’s bewildered the group-thinkers:

  1. SP500 closed up for the 3rd straight day yesterday, taking it to its highest-high since January 21st = +5.8% return since 2/8
  2. Russell 2000 closing at 648 last night made the rally in small caps since February 8th = +10.6% return
  3. Chinese stocks are up +5.6% since February 2nd
  4. Greece’s stock market is up +11.3% since its February 8th low
  5. Greece’s credit default swaps (CDS) have dropped -26% since February 4th (from 428 at the peak of fear to 315 today)
  6. VIX (Volatility Index) is down -28% since February 8th

Now, I could go on and on here, but you get the point. I am not waking up this morning trying to “go after” people. To the contrary, my wife and I are expecting our 2nd child in the coming days and I am simply trying to do my part in making this America a better place.

I, like a lot of people now, am realizing that I have my own brain. I am not the problem. To the contrary, albeit I am one very small part of 300 million, I am part of the solution.

That’s right. This is exactly Charlie Reese’s point. It’s the same point that rings in the ears of these nasty American Consumer confidence readings. And I didn’t need to go to Yale to figure out the math. Collectively, 300 million Americans are definitely smarter than the 545 people running this place.

It’s time we rid ourselves of those who are bewildered by the present that they created. It’s time for America to take this as a tremendous opportunity to evolve. It’s time I stop this rant and get on with my day.

Before I do that, I’ll leave you with another thought from one of 300 million people out there who is thinking:

“Einstein’s theory of relativity showed that Newton’s laws had to be modified for object moving at higher speed; the same might be said of our international system. The old laws of power, confronted with a faster-moving and more intricately ordered system, are now in need of modification.”

And remember, that bewildered look on Hank Paulson’s face isn’t Newton’s…

At 1122, the SP500 is overbought. Please don’t chase the group-thinkers and buy them up here. They’ll give you plenty of opportunity to buy them lower. I have immediate term support down at 1107.

Best of luck out there today and God Bless America,

KM

 

LONG ETFS

FXC – CurrencyShares Canadian Dollar — Canada's currency was on sale on 2/25/10 and we are bullish on the Loonie's long term TAIL, at a price. Look for rate hikes in Canada in the coming 6-9 months.

 

XLF – SPDR Financials — With sentiment negative and a Piggy Banker Spread hitting a record wide spread on 2/23/10, we bought red.

 

XLK – SPDR Technology — Technology is underperforming the SP500 YTD; a down day on 2/22/10 prompted us to buy more. We expect to see some positive mean reversion for Technology as M&A picks up.

UUP – PowerShares US Dollar Index Fund — We bought the USD Fund on 1/4/10 as an explicit way to represent our Q1 2010 Macro Theme that we have labeled Buck Breakout (we were bearish on the USD in ’09).

CYB - WisdomTree Dreyfus Chinese Yuan — The Yuan is a managed floating currency that trades inside a 0.5% band around the official PBOC mark versus a FX basket. Not quite pegged, not truly floating; the speculative interest in the Yuan/USD forward market has increased dramatically in recent years. We trade the ETN CYB to take exposure to this managed currency in a managed economy hoping to manage our risk as the stimulus led recovery in China dominates global trade.

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. We believe that future inflation expectations are mispriced and that TIPS are a efficient way to own yield on an inflation protected basis.
 

SHORT ETFS

IWM – iShares Russell 2000With the Russell 2000 finally overbought from an immediate term TRADE perspective on 3/1/10 and added to it on 3/2; we got the entry price that the risk manager makes a sale on strength.

 

GLD – SPDR Gold We re-shorted Gold on this dead cat bounce on 2/11/10. We remain bullish on a Buck Breakout and bearish on Gold for Q1 of 2010, as a result.

 

XLP – SPDR Consumer Staples Another capitulation squeeze is in full motion for the short sellers of everything "consumer". Shorting green as inflation starts to creep into the system again.

IEF – iShares 7-10 Year TreasuryOne of our Macro Themes for Q1 of 2010 is "Rate Run-up". Our bearish view on US Treasuries is implied.