Ken Heebner of CGM Funds is one of few mutual fund managers we keep a close eye on; he is a very aggressive fund manager [May 6, 2008: Ken Heebner's Trading for CGM Focus Tripled in 2008], and through last summer had an incredible winning streak going - then he was placed on the cover of Fortune [May 28: Ken Heebner - America's Hottest Investor] and for you Sports Illustrated fans - you know what happens next. Since he is aggressive, has the ability to short, and has been a lot more right than wrong over the years, I like to keep watching even as he has recently struggled. Year to date in 2009 he is still down nearly 10%...


I went back and looked at his major moves for Fourth Quarter 2008 (Oct - Dec 2008) and ironically his huge move into insurance stocks was "right", but "early". [Feb 18: Ken Heebner's Fourth Quarter 2008 Moves]

Last week, I talked about CGM Focus Fund (CGMFX) and how the fund was hammered after oil prices plunged. Currently traded around $37 a barrel, crude oil prices have lost more than $100 since last July. Even though OPEC has pledged deep cuts in oil production, demand for oil was hampered as global economies entered recession. Yesterday, the Commerce Department reported the slimmest trade deficit in November since 2003 at $40.4 billion, thanks to falling demand for foreign goods including crude oil.

But will oil prices stay this low if the economy recovers later this year, as some economists have predicted? The answer is likely to be No. Some analysts said oil could be trading at $60 a barrel on average this year, according to Bloomberg. If that’s indeed the case, now may be a good time to position your investment (if you are investing in oil at all) for the upward swing.

Cramer critics are saying the Booyah Master is being inconsistent by declaring the U.S. is headed for a 1930’s style Depression one moment, and criticizing the bears another moment. Cramer defended himself by citing the trillions of aid which are being dedicated to bailing out banks, ailing failing auto companies and even propping up problematic loans. The bill of this bailout is going to be heavier than all similar government measures since World War I combined, but the spending will prevent another Great Depression, said Cramer. Quoting John Maynard Keynes; “When the facts change, I change my mind. What do you do, sir?”

I thought that it’s time to revisit Ken Heebner’s macro exposures after the recent WSJ article about Heebner making a big bet on Financials. I had written about Ken Heebner’s CGM Focus Fund (CGMFX) before. CGM Focus has an excellent long term track record and its portfolio manager, Heebner, manages it as a high turnover fund to make large sector and macro bets.

My analysis shows that Ken Heebner is making more than just a bet on Financials, he is betting on a cyclical market recovery.

The market continues to slide, and it seems like the whole world is running to safety.

Three month T-bills yield 0.18%. Retail mutual fund holders are pulling out money at a record pace. Mutual funds experienced a net outflow of $23 billion in July and $6 billion in August. Investor continued to cash up in September as well. Total equity mutual fund outflows excluding ETF’s totaled $75 billion for the last three months according to AMG Data Services.

For the uninitiated, the term to puke indicates to flatten a position, usually the result of a stop loss.

I have written about Ken Heebner before – that he is a manager who runs a high turnover, high concentration portfolio with a good long-term track record. Heebner had a hot hand for the first half of 2008 in managing the CGM Focus Fund (CGMFX). The defining characteristic of the fund for 2008 had been its long commodity-short financials exposure – until now.