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The Chairman
Victor Niederhoffer

10/26/04
Victor Niederhoffer: Blue Market

The series “Jazz” by Geoffrey Ward and Ken Burns includes the story of Billie Holliday. In addition to being one of greatest singers of all time with her blue notes and soulful delivery, she was a great card player. She traveled with the boys on Count Basie's bus, and at the end of the tour she invariably had so much of their money that she had to lend them money for Christmas presents. The story is a bit too close to home for me, for as much as Mr. E is bearish I am bullish.

But that's not the end of the story. The situation should play itself out by Christmas, when I have the market pegged for way above 1100. But if I'm wrong I could lose everything again and then at least one knows that E will be there to treat me to Christmas presents for my kids as the palindrome once offered after 1997.

Louis Armstrong was discovered by Joe Oliver in 1918 but in 1937, Louis saw Joe tending a pushcart in Savanna selling tomatoes and potatoes to make ends meet. Louis gave him $150. And that evening, Joe showed up at the Savannah hotel in his turned down Stetson hat and wing-tip shoes, fresh out of hock. Sort of like Morse the day he came back to Trinity Church by Wall Street.

Presumably if I am reduced to poverty again, I can count on someone out there somewhere, perhaps the derivatives expert himself, to help me get out of hock. With the volatility I love to sell (especially at the seemingly ruinous and non-empirically justified current levels, and despite the fractal nature of prices, the decline of dollar et al, the unsettled state of the war and the U.S. presidential race, the continuing instances of companies reporting earnings weakness relative to expectations, the dismal drag on $55 oil, the continuing evidence of corporate malfeasance, the upcoming woes in China and its spillover effect on purchases of American securities, the parade of academics with mathematical models predicting earthquakes, the continued bearishness of the two most sagacious and palindromemetical billionaires, the inevitable predicted increase in interest rates and its anticipated ill effects on stocks, the continued evidence of exuberance over certain stocks, the continued loss of manufacturing AND agricultural jobs since 1890, and the hornets' nest of other good reasons to be bearish that only an Alan Abelson could fully enumerate), this eventuality of exeunt-ing, pursued by a bear, is all too likely again.

Mr. E responds:

i am there for you, always, not -just at christmas....or at other holidays

i do see oil peaking in december as Oilgas in now in backwardation in singapore where the ships will arrive in time....but will bush return us to fiscal sanity and convince our foreign creditors to loan us money at the same currency rate ?

there may well be a salary drive by the real money types as they try to manipulate the market BUT remember well this

in a study of 18 stock markets, the facts support that in all cases in all years when VOLATILITY was LOW stock returns in those years was ZERO or NEGATIVE...in all cases

when vol was moderate so too were returns...and when vol was HIGH so too were returns

right now vol is low and the outlook should be modest as well...

in time i will cite the empirical evidence of this...