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11/15/2005
A Random Bearish Column Generator, by Victor Niederhoffer

In this day and age when so many bearish ideas are propagated daily, I need a way to keep on top of them. The best way I've found is to divide the bearish reasons into categories, and then pick bearish adjectives from another category, and then pick a impeccable source with a great track record to attribute them to. In using the computer to do this random exercise, I have been guide greatly by the financial weekly columnist who for 40 years, as far as we know, and by his own admission, has not once been bullish, and the columns on the site of two of the major bear funds. With the help of my colleagues, I compiled a list of 100 or so of the most frequently adduced bearish reasons.

One idea is to just do it the way the weekly does it: If the economy is in recession, predict a depression and a stock market decline. If a recession recently ended, predict a double-dip recession and a stock market decline. If the economy is expanding, predict Fed Funds rate increases and a stock market decline. Whatever you do, don't forget the Challenger layoff report and the Michigan sentiment index, which are always dismal, as well as the Employment numbers and other data releases by civil servants who are incented to increase the likelihood of government spending in their favored administration.

Another approach is to remember that the body snatchers use alliteration to insure that investors will have countless losses and insist that there are at least 10 such in anything that the computer comes up with.

However, I refuse to take the easy way, and want to come up with something really personal and customized, as only a computer can do, and not a banal apologia designed merely to protect against torts claims, or feather the nest of my boss who learned his financial analysis in the 1950s when Dow Theory was king.

Also too easy is a composite column: "I have dreamt that an evil entity, watching the Masters of the Universe, speculating against the US dollar, proposes to shave them smooth. It may be the same gang that keeps the US Dollar attractive for the foreigners sustaining the US economic boom, or the Plunge Protection Team itself."

There are four parts to every bearish piece:

  1. An example, company, anecdote, or report that is bad
  2. A general set of related reasons to be bearish based on the example
  3. A flurry of emotive words, scientific language, and analogies to describe the terrible state of affairs
  4. An appeal to authority to support the assertions, generalizations and reasoning

The first part, the anecdotes that spark the bearish case, are as varied as life itself and can include such things as the weather in Maine, the growth of timber, disappointing sales or earnings of any of 30,000 public companies. A computer scan of who and what's being reported on any day will be sufficient to start the automatic process rolling. And if the scanner is broken, then choose weakness in the debt or stock of General Motors, Cisco or Intel, or pick the latest derivatives debacle.

Below are the classes and categories for parts 2, 3, and 4 of the process. Regrettably, I have to go to Vienna today to deliver a talk on the flow of the Blue Danube River and its relation to the first (the bullish) part of the Triumphal Trio's work, so I will not be able to generate a completely personalized, custom tailored computerized bearish column until I get back, but doubtless some of my readers will beat me to the punch and others will get the mojo.

The major categories of bearishness are weaknesses or catastrophes in the following:

The list of pessimistic descriptions for these categories might best be divided into two parts, based on whether the market is up or down but for the sake of simplicity we will combine them and program the computer to invert properly based on an artificial intelligence algorithm.

Bearish Descriptions (Pick one or more):

Well, that's it. I'll have to wait to get the computer programmed to do it until the boys and Minister come back, but I have to point out that there is a third part to any computer or actual article. That is the testimonial and appeal to authority. The weekly columnist is the grandmaster at this and here are just a few that one should choose from:

Ladies and gentlemen, please help me fill in the holes so that the computer can beat the human in this oh so important enterprise.

Thanks to Steve Ellison, J. T. Holley, Jim Sogi and Jaime Klein for their contributions to this essay.

Andrew Moe Replies:

No bearish random column generator is complete without a "despite" module that instantly turns good news into bad:

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