Trader’s Narrative

On his blog, Dr. Steenbarger looked at how professional traders differ from amateurs. One of the key differences was information flow:

2) Information Networks - The pros knew other pros and constantly talked with them to find out what was going on in the marketplace. This network was an important edge for many of the traders.

To illustrate that point, check out this excerpt of an interview with Ken Heebner in Fortune magazine:

When we discussed copper last fall, you clearly knew a lot more about the supply outlook than most commodity analysts. Copper production is water-intensive, and you mentioned water has been in increasingly short supply in some mining regions in Chile. Where do you get such good info?

Even today, no one else is interested in the water issue in Chile. You call the companies up, and they tell you there’s no problem - the reason is, they’re trying to buy water rights and don’t want to lose leverage. So if all you do is talk to management, you’re going to hear there’s no problem. But I talked to a mining engineer from one of the companies, and he started out saying, “We don’t have a water problem, we get 700 liters per second from our mine in the southern part of the country.” But then he mentioned how those guys up north, they get only four or five liters per second. I go, Really? He says, “Yeah they have to go 200 kilometers to get water.” Was it that way two years ago? “No.”

Make sure you read the whole interview because Heebner goes into a lot of different markets and sectors. His take on AMD is also interesting.

And in case you’re wondering why you should pay attention to Heenber, he has delivered 17.2% a year, vs. 12.8% for the S&P 500 index going back over 30 years.