Daily Speculations

The Web Site of Victor Niederhoffer and Laurel Kenner

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The Chairman
Victor Niederhoffer

4/18/2005
Briefly Speaking, by Victor Niederhoffer

  1. During the last eight earnings seasons (from 8th - 30th of earnings month), the stock market was up an average of 0.6%. Why is the road better than the inn?
  2. Approximately 60% of companies beat the average quarterly forecast, 20% hit it and 20% miss it according to First Call. Thus, there is a chronic tendency to underestimate earnings among analysts, and companies tend to pull out the extra stops to beat them. Of what practical value is this.
  3. Why should news of a shortfall of 5 cents on IBM with the estimate for the rest of the year "in line with what you boys are thinking," according to IBM's treasurer, cause 13 declines in a row covering 18%?
  4. It would be the kind of symmetry that the market loves if the big decline were to start in conjunction with those who knew about IBM'S shortfall and stepped up earnings report in advance selling madly, and end with Intel reporting better-than-expected earnings as it usually does. Presumably Texas Instruments is not symmetrical enough.
  5. A Big League query. Given the market has been down three days in a row and the current day is up, what are the chances that the current change will be above five points? The answer is very surprisingly 4 to 1, but this is the kind of useless query that we encourage you never to make. Always look ahead not at the random probabilities of a previous event occurring.
  6. TrimTabs has been beating the bush saying that smart buyers like corporate buybacks and acquirers and dollar holders abroad are having a field day buying the Hades out of the market while hedge funds sell it to them with abandon regardless of the price. They hope that when the hedgies are forced to cover, there is not much carnage like occurred in oil and foreign exchange. Let us hope they maintain a proper humility and can walk the tightrope of making money on shorts that no one ever has before.
  7. The average move for the second day after tax day is surprising and well worth investigating with a pencil and envelope.
  8. For want of a nail a war was lost. But for the column that the Collab and I wrote on April 20, 2000 we all wouldn't be here and the world would be so much different. You see we were both out of work, and as our readers constantly reminded us for the next three years, 'How does a guy who blew up his fund and has no job come off writing a column telling people what to do? You can imagine the tightrope we walked with our editors when they received such missives regularly. But Jon Markman saw that column and said "it was the best column he ever read" and then he hired us. And if he hadn't, my goodness--- don't finish that sentence.

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