Oct

25

The Trader and the Professor

October 25, 2022 |

professor and I meet as S&P crosses 3800 amid Bloomberg warning on Friday oct 21 that an armageddon in the market seems likely.

at the turn of the century, it was common practice of Gould and Drew to spread rumors of a catastrophe on the market before buying with abandon to cover their shorts. thus the advice when the papers and brokers were most negative to buy . As I was out visiting children on Oct 21 and Oct 24 and the only contact I had with market was the bearish news and data source, i thought back to the days of the manipulators memorialized so well by Lefevre.

Bejan's latest book will be on evolutionary design (e.d.). we discussed the e.d. in the market over the last hundred years. commissions have gone from 10% a trade to zero, but the rake and vig and the chances of making a profit with short term trading has remained near zero.

it is instructive to realize that Livermore went bankrupt 5 times by not realizing the inevitability of the rake and the vig (bid-asked and commissions) to lead to bankruptcy and in his case suicide. The thing I loathe the most is when some well meaning personage says that two favorite books are Reminiscences and Education of a Spec.

guaranteed to happen: the powers that be make sure that, before an election, good news is rampant and reduction of service revenues is off the table forever.

Vic's twitter feed

Steve Ellison adds:

Remembering that the upside down man and his successor are often quoted as being bearish about the stock market, and remembering that they were bond salesmen whose best interest might not be served by clients buying stocks, I recall the fear, uncertainty, and doubt (FUD) technique that the 1980s IBM sales force was known for.

My first job out of college was assembly language programming on IBM mainframe computers that were the standard for large corporations. IBM essentially had a monopoly in this market from the 1960s on, but by the time I started in the 1980s, competitors such as Amdahl were nibbling around the edges of the market by offering "clones" of IBM systems for lower prices.

The IBM sales force's primary technique if they were worried a customer might buy from a different vendor was FUD. The IBM sales guys would come in and cast as much fear, uncertainty, and doubt on competitor products as possible. Other technology sales forces adopted the technique, too. In one example I was involved with while working at a technology company, a competitor's sales person told a customer that our product could not be programmed in Kanji. Kanji is not a programming language at all; it's a writing system for Japanese.

One ought to keep this history in mind when evaluating bearish statements about the stock market by bond fund managers.

Jeffrey Hirsch replies:

Appreciate the reminder, Steve and Vic. Been observing Goldman and other firms doing this in recent years.


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