Buy the rumor sell the news? Some trading adages hold true even in the most bizarre of situations. As we've been following closely for the past year and a half, there's been the most amazing run up in Venezuelan equities, fueled for the most part by the notion (hope?) that Chavez's presidency (reign?) would come to an end sooner rather than later because of terminal cancer. It is what we've been referring to as the "Oncological Boom" which is even more remarkable considering it occurred within the larger context of a global economic crisis. Let's take a look at the chart of the benchmark Venezuelan equity index going back to the beginning of 2007:
The Venezuelan authorities haven't been particularly forthcoming about the extent of Senor Chavez's illness so the news that makes it to the rest of the world arrives in murky bits and pieces. Lately those morsels haven taken on a more grisly tone and it is now becoming more apparent that El Presidente won't be making a full recovery, as had once been indicated.
The latest report comes courtesy of Dan Rather (yes, that Dan Rather):
“This reporter has been told that Venezuelan President Hugo
Chavez has metastatic rhabdomyosarcoma, an aggressive cancer
that has ‘entered the end stage.’ The information and
the quote come from a highly respected source close to Chavez
and who is in a position to know his medical condition and
history. This source says the prognosis is dire and that Chavez
is now not expected to live ‘more than a couple of months at
most.’ Chavez is running for re-election in Venezuela but
several sources--including the one who revealed the exact kind
of cancer-- have told me that they believe it is doubtful the
dictator will live to see the results.
The last time we commented on the Oncological Boom was back on April 27th, two days after Chavez had returned from Cuba for cancer treatments. The Venezuelan stock market peaked about a week after that and has since dropped about 12% from that peak. We would not be surprised if, upon Chavez's return, word leaked out to the Venezuelan investing community about his dire prognosis which caused a "sell the news" type reaction. Here's a blow up of the last month of the above chart:
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