This note was originally published at 8am this morning, October 20, 2010. INVESTOR and RISK MANAGER SUBSCRIBERS have access to the EARLY LOOK (published by 8am every trading day) and PORTFOLIO IDEAS in real-time.
“Leadership is getting someone to do what they don't want to do, to achieve what they want to achieve.”
Per our friends at Wikipedia, “the term America’s Team is a popular nickname in American sports that often refers to the Dallas Cowboys of the National Football League. The nickname originated with the team’s 1978 highlight film, where the narrator opens with the following introduction:”
“They appear on television so often that their faces are as familiar to the public as presidents and movie stars. They are the Dallas Cowboys, America's Team."
Tom Landry was the accountable leader and coach of America’s team. His teams won 2 Super Bowls, 5 NFC titles, and 13 Divisional titles and his 20 career playoff wins are still the most ever by an NFL coach. Ever, as we like to say at Hedgeye, is a very long time…
This year, America’s Team looks like it’s being coached by Ben Bernanke. The Dallas Cowboys have started the season at 1-4. Leadership is lacking and teams playing against them aren’t going to quantitatively ease what they want to achieve in spite of them.
Who is China’s Team? Who are their leaders playing for? Are they willing to do what they need to do to achieve what they want to achieve? Yesterday, China’s Team continued to do exactly what a politicized and feeble American leadership team has not, and will not, have the spine to do – respect the cost of capital and fight inflation.
China raised interest rates because they see what we see. It’s priced in copper, corn, and cows. Until yesterday, it was all staring every real-time risk manager in the face. Before yesterday’s -2% selloff, the CRB Commodities Index (a basket of 19 commodities) hit a fresh YTD high. The score is a stickler that way. It doesn’t lie; politicians do.
Yesterday morning, as Wall Street’s latest leadership lemming was talking about the “power of the franchise” at Bank of America while his stock was hitting a fresh 52-week low, I started laughing out loud in my office…
I wasn’t laughing because my Managing Director of Financials, Josh Steiner, has had me short BAC 9 times (profitably) since late 2009. I was laughing at Brian Moynihan like I would any coach or player who seriously has no idea how badly he is losing.
As the day progressed and the US stock market selloff picked up momentum, breaking a critical immediate term TRADE line of support (1170 on the SP500), it was hard to discern which factor was the driving force…
- Was it Apple?
- Was it Gold?
- Was it Bank of America?
Or was it fear that China’s Team was providing some leadership to this global economic system by doing something that US-centric stock market investors didn’t want them to do? China doesn’t want to hold the bag of inflation risk associated with Bernanke’s Quantitative Guessing.
Notwithstanding that the fear of raising interest rates is a narrative fallacy unique to CNBC watchers (Chinese stocks closed up overnight on news of their rate hike, fyi), this morning’s manic media in America will be right back at it beating the drum of losers.
In yesterday’s missive I wrote that America’s markets are turning into the sort of soft and qualitative excuse making zones where losers find comfort and coddling.
Read these two headlines this morning and you tell me – are we winners or losers?
- “Bank of America says it is not responsible for the poor performance of loans due to the bad economy” –CNBC
- “Dollar weakens on prospects of Fed officials to signal easing” –Bloomberg
Sadly, I think we have completely lost touch with what America’s Team should stand for. Whether it’s total abdication of responsibility from an Investment Banking Inc. CEO or a Blind Belief that Big Government Intervention is the only way out – it’s driving the winners in this country to trust China’s Team more than they trust their own.
Do you blame them? At the same time that Chinese, Brazilian, and Australian central bankers were proactively addressing inflation risk, the President of the Chicago Fed (Evans), who has never seen a commodity price go up that he’d call inflationary, was “reiterating his belief that the Fed should reassess how it measures inflation.” America, this is embarrassing. Flat out embarrassing.
After waiting and watching, we re-shorted America’s stock market team (SPY) last Wednesday, October 13th at 11:54AM EST. We shorted its conflicted and compromised currency (UUP) on Monday, June 7th at 3:38PM EST.
The losers in this country can call what my team does whatever they want – we call it being on the winning side of this leadership mess. We are Hedgeye Risk Management and we support this message.
My immediate term support and resistance lines for the SP500 are now 1155 and 1170, respectively. On weakness yesterday, we added another 3% to the long Germany (EWG) position in the Hedgeye Asset Allocation Model. Germany’s Team is winning too.
Best of luck out there today,
Keith R. McCullough
Chief Executive Officer