Great Investors

Bloomberg has a story today ( about Warren Buffett’s failures. Distressed Debt Investing ( quotes Seth Klarman’s latest investor letter, in which he talks about the propensity of other investors to move into poorer opportunities when the market presents no exceptional ones.

Both of these carry important reminders. First, one will have failures, and years in which the failures outweigh the successes. Second, sometimes there is a market opportunity and sometimes there isn’t — opportunity cannot be forced.

Distressed Debt Investing also mentions, in the same piece, the author’s enthusiasm for bankrupt equities. I wonder whether this is an area worth looking into.


There is bad news for my copper trade, in that a majority of analysts are bullish on the metal. This is a facetious point, but I do not like to be with the crowd. Happily, the crowd’s reasoning is that stockpiles monitored by the LME have fallen 7.4% since October (although Shanghai stockpiles have more than doubled this year). I think this is mostly irrelevant. Over the past few years, copper has danced to a macro tune.

On Being Original

There is no need to be original in markets — only early. I tend to feel rather dim when I find I have the same opinion as the market, but I should not do so when the market has caught up with me, rather than the other way around. I have had varied success in being early, but I was early into short EUR/USD, early to spot the deteriorating macro picture in the spring of 2011, early in calling a rebound in the autumn, and I was fairly early to call a rally this year (late January). I failed to trade the last two, the former because I decided to hold through the rebound (which was a mistake, although it worked in EUR/USD), and the latter because my trading process did not allow it. I have learned the lessons of both of these episodes — I am now more inclined to exit before a reversal whether or not I think the broad trend is likely to continue, and I am prepared to enter a trend when I have a good reason to expect it to run on.


Brent crude has posted new highs in EUR and GBP terms. Brent has rallied because of the Iranian situation. As in 2011, high oil prices could take a while to affect the real economy, longer to affect the data flow, and longer still to affect the markets; but I think an oil-price spike as a result of increased tensions over Iran’s nuclear programme are at present the clearest risk to continued growth this year. It is worth noting that the risk is less for the US than for most of the world, because local supply dynamics continue to keep WTI at a large discount to Brent. This is another reason to favour US equities, if an entry point presents itself, provided rising oil prices have not changed my risk-on view by then.

Incidentally, the FT reports that investment banks are suggesting NOK and CAD as “hedges” against an oil-price spike. I suppose that might work, but only at the start — once high oil prices start to weigh on risk appetite, risk-off currencies will benefit.


  • Initial claims 351k a.e. Falling trend continues.
  • UK prelim. business investment Q4 -5.6% d.e. in a big way.

Today and the Weekend

  • Revised Michigan sentiment.
  • New home sales.
  • G20 meetings.