ECH and the danger of spreading too thinly

More semi-random musings.

So as sit back and watch the bullish action continue (let's be clear here..I still say this is a bullish relief rally in the middle of a nasty bear market) and with currencies on my mind, I checked back to see how longer-term pick ECH (the Chilean ETF) has been getting on. Here's the chart....

...and here's the article dated Feb 26th and entitled "ECH: the easy way to play Chile's currency revival". So another 20%+ winner and I'm suddenly wonderful and in the green on another fabbo LatAm call...hey isn't life great and I love me and all that crap. Yep, you got it, there's a very large and stupid ego trap on offer here. The point is that I could have recommended 75 stocks and here, two months later, rattle off a list of 65 winners and only two losses and oh my gawd what an amazing person I am.

Except I'm not. Because if you start that game you can suddenly find yourself further down the line conveniently forgetting about the crappy calls and shouting from the rooftops about the winners only, especially if you like recommending 50% of the stocks on offer to Joe Public. And you start glancing at stocks before calling them a buy, not investigating them and finding hidden value (or hidden problems)....and that's really not my style.

So what's the point here? I suppose that there are a couple. For one thing:

Any fool looks cool in a bull

For another this humble corner of cyberspace is just one guy, it's not a comprehensive news service. Things like Baja Mining (BAJ.to) slip past, for example (you seen that thing fly these last few days? Wowsers!). I miss a nice snippet of news and catch up to it later. I decide something isn't so interesting (and say nothing) when others think it's big news. After all, I'm still just a dude with a blog here. No pretensions. Just a dude with a blog.

So personally speaking, if I start spreading myself too thinly and reco'ing this, that and the other stock (and claiming mega-analytical success afterwards having just mentioned them once or twice in passing) I don't think there's much point to the exercise. Therefore what I'm going to do, on the stocks side at least, is stick more or less to my tiny corner of LatAm junior miners, keep trying to rootle out quality over quantity and not worry my brain too much about telcos in Argentina, real estate in Brazil or palm oil in Colombia....or even when all mining boats rise on the same tide and the badduns climb just as much as the gooduns. I'm sure you readers can find better places on the interwebnetpipes for all those companies, anyway. DYODD dude.

US Banks

A very short thought about this non-LatAm subject.

In the years 1999 and 2000 I was, of course, nine or ten years younger, nine or ten years less smart ('more stupid' is better, thinking again) etc. At the time I just couldn't make out the NASDAQ mania and stayed on the sidelines as it went up and up and up and up. Just sat and watched as my friends told me I was mad not to join in the fun.

And let's be clear here: I'm not one of those people who got badly burned by the crash, but I'm not one of those legendaries who (say they) rode the wave and sold just weeks before the top, either. I simply refused to go there and thus won nothing and lost nothing. I didn't go there for two reasons: Firstly I didn't understand the math involved...I couldn't see the value, the "fundamentals" (yes, i am boring..no need to write in on that point). Secondly there was an enormously vacuous and strange feeling in the pit of my stomach about it. It "just felt wrong" on some bestial or visceral level. Now I know very well I'm no George Soros, but he makes his big trading decisions (or so it's said) by gauging a pain he gets in his lower back. I can relate to that.

I haven't felt that feeling about things financial until today, but as I watched shares in Bank of America rise on the news it needs a $35Bn bailout it was deja vu all over again. There is no way I can possibly buy this market and I don't care if the Dow ends the year, the month or even the week at 10,000, either. I'm going to stay largely on the sidelines, dip my toe in occasionally, play my short-term trades, hold my lump of gold and be a whussy coward bear. I'll listen to others scream "BULL!" and tell me about their great week in the markets and ridicule me for staying majority in cash. And I'll sleep very well. Amen.

Cam Hui on Ken Heebner

Over at 'Humble Student of the Markets' and linked right here (go visit), Cam Hui takes a good, hard look at the recent record of fund guru Ken Heebner and finds him wanting. Quite right, Cam. I have fond memories of Heebner at this time last year when I was shouting "short PBR" (that got me into the London FT I shouted so loud) and people would point out that I was taking a contrary position to the legendary Ken. And the rest, as they say, is history.


Now for a short Ottotrans™: This is what Cam Hui (obviously a gentleman) says:

"Ken Heebner has a bottom-up driven investment process but takes big macro bets as a result of his bottom-up analysis. This style can work well when the economy is showing a trend, but I believe that Heebner tried to call the turning point a little early and got hurt."

And this is how Otto (obviously less so) translates it:

"Any dickhead looks good in a bull market."

DYODD

Heebner's CGM Focus Fund track record

(click to enlarge)

copper thoughts

I've been musing on these two longview copper charts over the weekend. The first one is the 10 year copper price chart (in U$ per MT), the second one is the 10 year LME warehouse stocks chart:

It's boring being a copper bear (in the short term) and watching the price move from $1.75/lb to $1.95/lb in quicktime. So when markets go against my forecasts, I'm always interested in finding out where my mistakes were made.

My basic in-a-nutshell bear call when the price stood at $1.75/lb or so was "copper won't go up because the price move so far has been monetary in nature and not driven by demand." I can still happily stick with that call, even though China imported a large amount of copper in February. This is because China is clearly stockpiling the metal and it's not satisfying final end-user demand.

However, it's clearly not the whole story. My best guess is that large funds have moved back into copper and are buying on speculation. That strikes me as my own bad excuse for calling the move badly, though....it's so darned easy to "blame the hedgies/PTB/WallSt crooks" etc for any market move that goes against you, isn't it?

Whatever it is, although I'm not comfortable with my mistake I have to stick by my call for the time being as fundamental analysis (my baseline) cannot see any reason for higher copper prices going forward. But be clear, that's more my personal analytical weakness showing than any particular table-banging. Any comments either left below or via mail from people with a view on copper very appreciated.

DYODD

UPDATE: Heather Walsh is one of the better reporters at Bloomie. She filed a report from the CRU conference today that goes under the title "Freeport Says Rally Unlikely To Spark Investment Jump". The contents from no lesser name than FCX CEO Adkerson back up my own position.

UPDATE 2: Tyler Durden at Zero Hedge throws another dos centavos into the debate. I agree here, too. What is it about Sundays and musings on copper, anyway?