Daily Speculations

The Web Site of  Victor Niederhoffer & Laurel Kenner

Dedicated to the scientific method, free markets, deflating ballyhoo, creating value, and laughter;  a forum for us to use our meager abilities to make the world of specinvestments a better place.

 

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The Chairman
Victor Niederhoffer

06/15/2004
Herd Behavior

On June 15 at 3:12 PM, the S&P futures moved from 1134 to 1128 in one minute in conjunction with an announcement that bomb squads were seen on 57th Street on Manhattan.  It elicits many thoughts.

1: Hope springs eternal. The bears had their day at 9:11 on 9/11, 2001, and ever since they have been hoping, playing for a repeat.

2: Same thing with the big decline on Friday, 10/16, 1987. That was followed by a big decline on Monday. By waiting for a recap , playing for the short at Friday close after a big down day, they lost more in the next 10 years by factor of 2 than they made by playing the well-known effect first discussed by Cross and myself in 1966 in JASA proceedings. 

3: Morse is back. He once made money with Trolley. And when he was seen as a ghost at Trinity Church several years later, the market rallied an immediate 5%.

4: What fools these mortals be. How much money can you lose thinking that some police action is your ticket to take advantage of an immediate $200 billion decrease in the market?

5: Bad memories of the man from S&P spotted at Bangkok airport with a briefcase ... he obviously was going there to downgrade the bonds again while I held the Thai market, and that was always a predictor of similar moves from Moody's, Fitch, S&P, and Thai rating agency itself, each accompanied by a 5% decline.

6: The herding behavior of humans. They take such comfort in following their leaders, suspending belief and mass action.