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I was moved by the stories of your Dad. Reminded me very much of mine. He was a touchstone whom oftentimes I sought counsel from, mostly in raising my daughter. Many of our discussions before he passed were about the moral decay of society and how it is theoretically possible that you can raise a child to be morally handicapped these days by upholding standards. His advice was always, "Raise them to be honest. It may not serve them in business, but they will sleep better."
My dad's father was the chief of police in Quincy, Mass. His father passed when he was 18, and he, being the eldest son, had a bunch of responsibility heaped on him early. Baseball, all of it, left the day his dad died. It was a foreshadowing of what was to come as many tragic cancer-related deaths of his siblings were to follow. He was never bitter, never complained of his lot, just soldiered on. He was a brilliant guy with amazing insights, intellect and intelligence and never really had enough clearance of responsibility to take a shot. He just went to his job at the light company every day. He used to say, "I've been poor and had money, but I always had the most fun when I had two nickels in my pocket." He did love life, and made the most of it. His outlook was, "If this is hell, I'll stay here." Thrombosis killed him. What little retirement he got was pretty curtailed because of it.
He never trusted the markets either.
The lack of integrity on the sell side was the primary reason I left. And the great elephant in the middle of the living room from '87 and post that has not been discussed. They point the finger at everyone else: It was the BP deal pricing, the Fed, the program traders, the hedge funds, the day trading housewives.
Everyone but themselves. The clearing houses et al. Initially transgressions were somewhat limited of nature, limited as to those who understood the inside of the business.
But what I have noticed in my limited experience with crashes was the eroding integrity that seemed to precede the events. In all areas. M&A, sales, trading, it can be noticed in the weeks preceding in the increased price swings. Folks losing confidence, bids and offers thinner. I suspect it occurred to some degree in the early days of markets, and will undoubtedly continue long after we are gone.
Eli Metchnikoff's work with acidophilus, systemic candida albicans, that won him the 1908 Nobel is an interesting study. The bad bacteria, lost integrity, i.e., the government numbers, then insider trading, then programs, lying analysts, then corporate earnings, accounting firms lying now, it's to the point nobody tells the truth anymore. And it has become so widespread across all levels of society. When the broken integrity hits a certain degree, the markets crack, get sick, flush the bad bacteria. I fear the next crash may reflect the depth of this decay. When? Who knows, but it will happen. But we have to make a living till then and after. With humility and integrity hopefully.
Metchnikoffs idea's seem to be spot on and the medical community ignores it. More Vioxx, please. I have begun to look at and try to quantify Metchnikoff's ideas as they would apply to the markets. His theory should work in both directions. Positive and negative, there must be one overlapping signal for health and direction.
I was curious about your comment of losing for five years after Artie died. My father recently passed, and it has been mentally tough.
Victor Niederhoffer responds:
A beautiful tribute to your father. I couldn't trade at all for a long time around and after my father died. By the way, I have Metchnikoff's book and agree with him that the duration of the food in the body is key to degenerative disease, and that yogurts are the key to health. Your analysis of the crash seems very appropriate.