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HEDGEYE ASSET ALLOCATION

Cash 55%, Int'l FX 21%, Bonds 12%, Commodities 6%, Int'l Equities 6%, US Equities 0%

But their intervention makes our acts to serve ever less merely the immediate claims of our instincts.”
-Albert Einstein
 
I started intervening in the Hedgeye Portfolio yesterday, making my first sales (long or short) since September 3rd.
 
We’re still long Gold (GLD) and we didn’t sell any of that 6% position in the Hedgeye Asset Allocation Model as we saw yesterday’s melt-up in the World’s Replacement Currency a direct function of the fear trade – the fear of US Congress being back in session. We remain short the US Dollar (UUP).
 
Today’s market headlines are going to be dominated by the bad kind of intervention – government intervention. Particularly when it comes to the Fiat Republics of Japan and America, you have professional politicians who fundamentally believe that this is the only way out. It’s sad to watch losing teams repeat their mistakes.
 
Japan is intervening in its currency market this morning (bearish for the Yen - we are short FXY) and America is going to host another Groupthink Conference in Washington, DC where Timmy Geithner leads the unaware in pointing fingers at the Chinese for not intervening.
 
On Japan’s intervention, I found an interesting quote from Geithner who believes “deeply” in the Monetary and Fiscal Policy Manipulation model of the United States of America:
 
“They’re working through some difficult problems… My view is they should be focusing like we are on how to make sure they’re reinforcing recovery in Japan and doing things that are going to help.”
 
God help us all.
 
I’ve ended a few of my morning missives with this thought over the course of the last few days and it’s worth repeating in order to explain why I started making sales yesterday. The biggest risk to NOT selling US Equities here is US Congress and the “economists” that lead their decision making (Geithner says he’s “not an economist” by the way, so we’ll give him a hall pass as he’s only responsible for advising the President on economic matters).
 
Back to taking matters into my own hands via the Hedgeye intervention strategy…
 
Here are the moves we made intraday in the Hedgeye Portfolio yesterday. As opposed to Washington’s broken lip-service model, we are big believers in the modern day transparency/accountability model. We think the biggest opportunity in finance is showing the world what it is exactly you do when you make risk management decisions and why. Opacity is dying on the political vines of perceived wisdom.


1.      09/14/2010 10:22 AM

SHORTING FXY $119.08
We're looking forward to seeing what happens to the Yen when the Chinese start blowing out of their short term JGBs. Japanese Yen intervention imminent - thats what Fiat Republics like this do.

 
2.      09/14/2010 10:42 AM

SELLING CIT $38.74
I haven't made a sale (long or short) since September 3rd. It's time to book a gain and I'll let a Financial out the door first. Steiner remains bullish on CIT's intermediate term TREND.

EARLY LOOK: INTERVENTION - Chart1 CIT


 

3.      09/14/2010 12:49 PM


SHORTING ZMH $49.84
See Tom Tobin's bearish note on Zimmer today for details. The stock is up today but is broken from an intermediate term TREND perspective. Shorting green. KM


 

4.      09/14/2010 03:20 PM


SELLING NIB $38.79
Keeping a mean reversion TRADE a trade. We don't have to buy-and-hold cocoa. KM

EARLY LOOK: INTERVENTION - Chart2 NIB

These are just the headlines for research reports we put out on these positions. They are punchy because we like punching some of the hedgies out there whose business model is bullying the sell-side. Everyone knows the sell-side’s horse and buggy whip model is stale. This market needs new blood – and we’re happy to be hated by those we can beat.
 
On the same day that we bought Chinese equities (CAF) we also published a research note titled “Japan - The World's Easiest LayuP” that outlines why we were shorting the Japanese Yen as it approached 83 versus the US Dollar. Rather than listen to a revisionist sell-side bull tell you today is a “buying opportunity” in the Yen, please email sales@hedgeye.com <mailto:sales@hedgeye.com>  if you’d like the view of the interventionist firm that called this before the “risk on” day.
 
Our immediate term TRADE lines of support and resistance for the SP500 are now 1107 and 1128, respectively. That’s the first time I’ve issued a lower-high of immediate term TRADE resistance for the SP500 since September 3rd. That’s a marginally bearish signal and the SP500 not being able to eclipse 1144 on a closing basis to the upside is an explicitly bearish one.
 
Best of luck out there today,
KM
 
Keith R. McCullough
Chief Executive Officer
HEDGEYE RISK MANAGEMENT

Subscribe to Hedgeye to receive research and portfolio positions in real-time.  This note was originally published at 8am, September 15,2010.