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18-Apr-2006
Ambushes and Signals, by Victor Niederhoffer

One of the themes of Louis LíAmour novels is how humans can use seemingly intangible signals to ward off danger or plan a proper path to the pot of gold. One of my favorites is that he knows that the Apache always plan the ambush in the unexpected place, because thatís when the victim will be least alert. Also, how he can tell from the sniffing of his dog, or horse, that all is not well, and that something unimaginably terrible is lurking. The unseen signal, the sixth sense led me to consider some unobtrusive signals for markets.

The Donut Indicator

My colleague Mr. Wiz points out that when he brings donuts, as he did this morning, it's very bullish. This one's easy to figure out and doesnít involve a sixth sense. You see, he stops to buy donuts when he fills up on gas. There's always a lag in gasoline price increases, because it takes a few days for inventory to be refueled at the station and most stations price their gas at refilling cost, i.e. the last cost they faced on refueling or a little less. So Wiz always fills up before the increase and of course the donut store is across the street form the gas station. So he brings the donuts after oil is at a 20 day maximum, and that's usually bearish for oil, and when oil goes down or stays the same, that's bullish for stocks. (this one has to be tested with donuts and oil both as independent variables to tease out the independent effects).

The Romance Indicator

For many years, I've told my other that it's very important for the market that there be a reasonable level of romance in the evenings. I've found that when there isnít the market tends to go down miserably. The causal chain here may not be due to the romance, but might be due to the fact that when things are really bad, and the adversary is set to go for the jugular, I sense it; there's a day for example, where they had me in their sights, but toyed with me like a cat playing with a mouse, only to make a much bigger kill the next day. I sense this, and thus the association which I use to my advantage to ward off the Evil One, and to make an ill wind bring a little good.

The pain in the back

The Palindrome always used to say that he knew the market was going to crash when he had a bad pain in the back. I have checked with physical therapist Andy Ilowitz, my dearest friend, and he assures me that it is common for pains to increase during times of economic turbulence. The reason is probably biological, having to do with increased bacterial and virus activity during times of stress and lack of sleep. The Palindrome is the one person I knew who had the sixth sense of danger, and he used it often to fire chief operatives when they were about to fall into doom, and to predict my own demise many times before it happened. I donít know if this signal could be quantified except that he often plays at a certain domed edifice in Long Island City, and a call there to see if he canceled a court, or better yet, a sentry in the parking lot, or best of all, an arrangement with one of the beautiful babes that takes the $500 an hour court reservations should do the trick.

I open the floor to other indicators of this nature and will give a prize to the best three that are forthcoming.

 

 

 

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