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01-Sep-2006
It is Pleasing to Me, by Victor Niederhoffer

It is pleasing to me to see that there are few if any posts on this site regarding doomsday scenarios. Such are the kind that make owners of stocks and markets sell at the exact low. That has always been the way of syndicates, spread the news of impending pass of the dividend, and impending bankruptcy right before buying a tremendous line from the last sellers. Daniel Drew was famous for this with Erie stock, and in 1885 Worthington Fowler finally figured this out (helped by the advice of Colonel Smith) and bought a 1000 at 3, before writing 10 years on Wall Street in 1887. At the same time the chronic bear and ghost Jacob Little rushed from Trinity Church to New Street to short himself to his oblivion with the same stock ... [read the full chapter entitled 'Drew Plays His One Stringed Lyre - Erie']

The same thing of course happens today with the markets. Right when we are hearing the most about how interest rates could never fall because Bernanke has to prove himself, or how SARS is going to destroy us all, how housing prices are going to rise 10% or oil go above 100, war in the Middle East is going to escalate, bombers are arrested in England, the President's popularity is at a new low, the Democrats are going to sweep the electorate, individual stocks are going up only on hype and there is chronic unemployment in factories in Bethlehem.

But such times are the time to buy, especially if the market has not gone up in a few years, and stock rate returns are 3% or 4% above bond yields.

I try not to allow such a coloring of the news from ghosts and fellow travelers of the modern-day syndicates to populate this site. You see, I would be doing you a big disservice, because you might think that there is more of a chance of doomsday now than any other time during the last 100 years when stocks went up 10,000-fold. If it were more likely, you would have to figure out whether that was bullish or bearish or whether it had been discounted, or whether there was anything on the other side that was more relevant.

I have tried, ladies and gentlemen, to provide an agenda for you free of propaganda, devoted to self improvement and an optimistic view of life that takes account of the resilience of the economy and the infinite nexus of connections that keeps the flow of capital and goods going; an agenda that takes account of the regularities between the shares of wealth, the Gini coefficients if you will, between those who take on risk and those who are indirect second-handers for the big traders trying to get you on the wrong foot so that they can quietly cover their positions at the bottom.

I hope it has not all gone in one ear and out the other.