An account rep from E*Trade cold-called me this afternoon (where I do keep $250k), asking if I wanted advice on how to put the cash from a called bond position to work (a OR hospital muni on which I made 14.2%). But nobody in this country but a professional fixed-income manager knows the bond market like I do, and certainly not an ‘account rep’ trolling a customers list. So I hit back hard. “Where did you get your degree? In what field? Can you support yourself trading for your own account?”To her credit, she didn’t lose her temper, and she named a Mexican university, “International Relations”, and “‘No’, she couldn’t yet support herself from her investing alone”, pleading she was only 32. We talked some more, and that gave me the opening I needed to distinguish our skill sets. As a ‘top-down’ money-manager, she could probably do well for her clients, especially if she focused on Latin American opportunities. She spoke the language, was connected to the head of a construction company that had just complete a massive port development project, and Mexican stocks have beaten the crap of US stocks. “If I were you”, I said, “back away from making bond recommendations to anyone, because it’s not a market you know. Instead, build on what you do know and develop a niche for yourself within E*Trade as the Latin American expert.” The more I thought about my advice as I did my customary afternoon walk, the better I liked the idea for my own. Gringos know absolutely nothing worth knowing about what happens south of the US border, which --ironically, as the Reconquista advances-- is moving steadily north each year. They don’t read the language. They don’t follow the news, even in summary form via The Economist or the BBC. But there’s a lot a very bright, well-educated people running the Central and South American countries and building business there. Also, typically, those countries are managing their deficits and debt problems a lot better than the US, Europe, Japan, or China. This isn’t to say that that the politics can’t get wild, that corruption isn’t rampant, that accounting standards are comparable, etc. But south of the US border is a lot more than just bullets and bandits, bananas and burritos. In short, digging into the region’s companies and tracing out the inter-market relationships they have with the rest of the world sounded fun. Thanks to her cold call, I had stumbled onto the sort of diversifying project I had been looking for in 2013, something offbeat and exotic, but something that would demand a combo of fundamental analysis and technical trading skills that would cut across stocks, bonds, currencies, and commodities and could be done from either market side. And speaking of going short, track down the talk Kyle Bass gave a couple weeks ago in which he laid out his forecast for 2013. Grim stuff. The central bankers have painted themselves into a corner, and negative interest-rates cannot be excluded as they desperately try to prevent the credit world from blowing up. In either case, the bond bull still lives. But the game has gotten tougher and a lot more dangerous. Carlitos
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