Speaking of "the playbook", this is appropriate. Ken Heebner is moving into the early cyclicals - we'll see if the timing is appropriate. As we saw a few weeks ago, Mr Heebner was going heavy into financials (Nov 14: Ken Heebner Moves into Financials Big Time) - that was a bit early as Citigroup almost disintegrated but when the government has your back no matter what, EVENTUALLY the trade will work. (although if your timing was off you suffered dearly) We bought a trio of banks this summer and thus far have been minting losses off them! Thankfully only a small part of the portfolio thus far. Heebner has had a lousy year, but everyone does every so often - still one of the best over the past decade. (May 28: Ken Heebner - America's Hottest Investor)

Remember to do this "early cycle" trade (of which financials are a big part) you have to cover your eyes from all current news, and "look through the valley to the other side" in a time when Americans act like... well Americans have the past 25 years. It doesn't have to be correct; you just need the horde to follow you in - as long as you all suspend disbelief together and all play by the same playbook - you can all win. As I wrote in my previous entry a lot of people tried to play this angle via huge gulping of Kool Aid (the government will save us, there is no recession, ok there is a recession but it's short and shallow, etc etc) throughout 2008. Eventually it will be "right".

• After making a fortune betting against financial stocks until this summer, mutual-fund manager Ken Heebner is turning bullish on the sector. Mr. Heebner, who runs one of last year's best-performing mutual funds, is sure banks and insurers will recover next year, thanks to Treasury Department and Federal Reserve efforts to bolster lending. "A year from now, credit will be available because of the government's actions," said Mr. Heebner, who works at CGM Funds in Boston.
• Only time will tell if he is right. Meanwhile, that switch has harmed his performance lately.
  His CGM Focus fund, which for years has posted a string of market-beating returns, this year is lagging behind the Standard & Poor's 500-stock index by 11 percentage points. For only the second time in his 11-year tenure, he is in the red, off 52%.