Apr

13

@VicNiederhoffer Tweets

April 13, 2020 |

 April 9th:

The best advice on the stock market during a "bear market" is contained in a book by Frank Kelly Why You Win or Lose: The Psychology of Speculation written in 1930 by a man who played the market during the 1929 crash and after and profited.

The advice is "the wrong behavior is almost sure to be seemingly logical behavior". Indeed one of the most charming things about the stock market is that one may prospect there by being illogical. The few who contrive to take more out of the market than they put into take more out by by going contrary to what would generally be accepted as logic. They do the opposite of what seemingly intelligent speculators are doing. Kelly gives many examples of this for the 1929 crash. Stocks go down on good news and up on bad news. A stock announces a dividend (earnings beat) and goes down but it rises when the dividend decreases (earnings masses) and goes up. Many other examples are given as to why the public buys stocks when the prices are near the top and sells them when prices are near the bottom.

No better example of the value of the illogical is given by the price behavior this week. For example, today. Friday March 7th, unemployment was at 8.5 million and 8 million more claims came in. What a time to take advantage of the coming carnage than that

At the beginning of the week the surgeon general reported that this would be a disastrous week or the hell of a week. Dr. Fauci in an interview give his usual prolonging the likely course of the recovery and downplaying the host of a cure within 4 months (why don't they confine him to jogging around a forlorn and distant track while others try to salvage any hopes of recovery). The drum beater of bad news continued during the week with headlines about retailers coming failure to meet debt payments and even online marketers were hurting because although views were up, advertising revenues were way down. Hardly a nook was spared. Typical was the highlight that airline leasing companies were in jeopardy to say nothing of the layoffs in Boeing and all travel companies.

No wonder the market has its best week in 48 years and that it is now 30% above its previous low. A content analysis of the negativity of news or headlines in the media this week would show this was the most negative on record. The WSJ was almost as negative as the NYT if that possible.

Is there any solution for succumbing to this all to human proclivity? Yes. A study of numbers will help. One example, it was 40 or so days without the stock market hitting a 20 day high. Such extended durations without a drink (or romance) are rare.

They have an expectation and Sharpe quite in line with what transpired. I could give many other examples. For example the big Friday decline that preceded the biggest rally ever. You have to be illogical and you can't assume that what happened in vivid memory continues.

Typical of all the bad news on the virus front was the number of new deaths and new reported incidents in NY reaching a maximum. (When will the common man understand that the more they test the greater than number of new virus will be found.

And the news that the after effect of ventilator cures are likely to be worse than shuffling off itself. As a benchmark the number tested is less than 10% of the population in almost all areas. The constant increase in the areas under lockdown and the extension everywhere. How illogical can you be?

T SUBSCRIBER 1 minute ago: "What we are doing is working," Dr. Fauci told reporters Thursday." Um, excuse me Dr. Fauci, you and your sidekick are strangling the economy of the US based on your euphoria over of this "pandemic". Mr. President, do what we elected you to do.

For all those against reopening the country until things are perfectly safe please educate yourself: (cont)

One more thing. Companies like Fedex and businesses like the professional sports have say 600,000 workers and the death rate is less than 10 deaths. How have they done it. They take care and use their common sense to distance.

Take manufacturing jobs 19 million or so. They are all used to tight work rules and restrictions on distancing. They would use choice and common sense to resume their jobs and pursuit of happiness. How did Mencken, Nock and Rand predict that we would give up all our liberties with a whimper.

What's amazing is that Kelly was able to profit by swing when commissions were so high unlike Livermore he was not born to commit himself in the Netherlands (never go near 62nd street). His swinging at least was with a several month holding period usually without margin.

Kelly didn't use margin and his average swing was 3 months hold so he didn't vig himself to death.

Follow @VicNiederhoffer on Twitter for more


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