Dec

4

If an all seeing eye could write a book about just one day in the life of the S&P, it would cover the gamut of emotions, strengths and weaknesses, goals and values of millions of people. Let me suggest a few chapters.

The next chapter would be the surprise. The book started the like a Louis L’Amour pulp novel, making sure that the reader was scared out of his wits with action so that he did not turn to the next chapter, (going down 19 points), the most exciting symphony you’ve written since July of 2006. But then, as always, everyone who was scared out loses money, and the big boys who like to snore as a fine art, make money by buying and holding, or taking out the canes on Monday at the close.

The third chapter would be about how, in the country of good fishermen, the technical traveler handballist, prize fighting, archaeologist, swing trading, buying the dividend yield, 800 winning trades in a row, ‘how to turn 1 buck into a million in a years’, person never fishes in the same spot twice because the crocodile has a very good memory. It gets hungry every week or so, and knows where you were fishing the last time, and then jumps out of the river at 1000 miles an hour to drag you under. By buying at the lows on a Monday or at down 5 on a Wednesday or Thursday, like at 1395ish last week, you were greeted with a nice 10 point profit. But then of course, never fish there again, because when you try to buy at 1395 on Friday, like you did on Thursday, Ha Ha, the joke is on you. Margin call, margin call, the little woman is not happy and cancel the vacation. You are immediately confronted with an 8 point loss when you do that.

The fourth chapter is about higher physical laws that are universal in all fields, and apply to human actions, the way Banks — the Abelson of fluid dynamics — says they do. Let us start with the universal law of gravity. The earth weighs so much more than you, and you are attracted to it — the same way that 1400 weighs so much more than 1403, which is why we have to play the round number game. So far there have only been 5 swings back and forth, above and below this round number, so of course let us end at 1400.40 for the week, just because there is a little error of measurement. The market mistress likes to pretend that she is unfathomable, so does not give you exactly 1400 or else you might think that she is losing her luster.

The fifth chapter would be in honor of our friend Mr. Rumpole — “Why is it always romance?” Yes, “Why is it always bonds?” They closed at a 20 day high, 5 days out of 6 last week, at 113 .47, 113.59, 113.88, 113.69 (but a high of 14.06), 114.41, and 114. 56 respectively, the last being an 11 month high, but still 1/2 a point below the high for the year. All good men must exceed this on the last day of the year, just for the sport of it all. But oh, what secrets lie in these new highs in bonds, and what strength it puts in to pulling the related iceberg along to its ultimate destination, to the cries of agony from the bears..

The sixth chapter would of course be the agony, the utter torture that the bears are being put to. Just when they were totally on their backs, at least the ones that trade, and Alan Abelson himself was sent out to vacation and recuperation because he had been wrong every week since he came back from his last holiday in mid July, ( He had been calling for a secular and cyclical bear market again and again, and finding one friend after another to be bearish — even a friend who was bearish because the frequency of the use of the word “Goldilocks” had shown variations from week to week — giving each other new hope). Is that not always the way. The old man at 85 still makes a pass at the nurse . Yes, the Monday move, was beautiful to the bears. It was the biggest decline since the Israeli-Lebanese War broke out, and it showed as far as they are concerned, among other things, that the plunge protection team was out of work after the election, and how nefarious their efforts had been in the past. Widely disseminated by their Elizabethan and prudent followers, the bears hope was that this was just the beginning. But the hopes, the hopes… Why did the bond yield have to fall so low, and why does it always happen that when you can make 6% more on equities than bonds, some institutions are going to opt for the former?!

The simplest chapter of the book would be “There is no such thing as a free lunch.” All the easy ways of making money are hard. The fixed systems are ephemeral, they are discounted and anticipated. Seasonality do not work, nor do such things as the ‘average low in October is 8%.’ The September close is non-predictive, nor can you make money by finding a 5 day period in which the market goes up, even though the only thing the Almanatarians and the Elizabethans agree on is that the market will hit 500 because of all the bad things in the world and because seasonality works.

It is well known that the total move in the stock market futures over the last 7 years of some 300 points is accounted for by a certain day of the month. And it was well known last year, and before the first revolution in the list, when the Agramacatarian left, how his subscribers made money by buying at the close of that day. And the Elizabethan would tell us the week after it happened in June or July how 11 of the last 11 expirations were down et al., and yet, here are the first days of the month this year:

Date Change Date Change
1/3 20 2/1 04
3/1 10 4/1 02
5/1 -08 7/3 09
8/1 -05 9/1 07
10/1 -05 11/1 -10
12/1 -03    

Anything that has not worked in 7 months, one is tempted to call dead in water.

I believe that you get the picture of what a great book this would be.


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