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10/20/2005
A Fitting Tribute, by Victor Niederhoffer

The S&P 500 paid Jim Lorie a fitting tribute today, the day of his memorial service, by breaking from below 1200 to above 1200 for the sixth time this year. Whenever the market was down and doomsdayists came to him with yet another crackpot theory about how bad the economy was, and how dishonest corporations were, Jim would always shrug and say something to the effect of, "It may not be tomorrow, but the market will rise like the sun at its normal rate in most long-term periods."

The Dimson-Marsh-Staunton estimate of a 10,500-fold gain per century seemed reasonable to Jim when I updated him with the Triumphal Trio’s great book, “Triumph of the Optimists.” One of the highlights of Jim’s memorial came when Erika Bartlestein, his stepdaughter, said that Jim was a great father but was very sparing in his advice, as he felt that the lessons best learned were those that came from within rather than without. Rule No. 1 was to put most of your money in the stock market.

It was a fitting tribute also to the day that wiped out so many of us in 1987, as noted in a very useful letter from Andrew Humbert, that on its 18th anniversary the market would register one of its greatest gains in the last three years – 1.6% in the S&P and 1.7% in the Nasdaq. The combination of a vivid event like the 1987 crash and the fear that it engenders with the backdrop of terrible memories elicited by comparisons to other crashes like those of Drexel Burnham Lambert and Long Term Capital Management should have been enough to put anyone in the bullish camp. As Gann loved to say, holidays and anniversaries of significant market crashes and booms, are always ripe for a turning point. As with most of his statements and those of his fellow travelers, who recently have become much less numerous on the Street, he fails to tell us whether those turning points are bullish or bearish. But Jim’s children and the readers of these missives were in no such quandary. I admit that when the DAX registered a 3% decline at 8 a.m., and with the woes of Intel and Refco front-page banner headlines across the land, it took more than the usual amount of courage to take the canes out of the closet.

The key turning point had to be when New York Fed President Geithner, for the fifth time, tried to bear the market down by giving us a litany of economic woes that could have come right out of the columns of the perpetually bearish financial weekly’s venerable star columnist. Finally, for the fifth time, the average man must have said to himself, “They’re trying to beat it down again! At a time like this, with a major firm failing! What contempt these governors must have for the public, to beat us over and over again with the same facts!” Finally, the collective public must have said, “We’re not going to let them treat us like fools any longer.” Presumably the Beige Book release was grist to turn that mill.

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