Recommended reading at Daily Speculations

There is always something worthy of note over at Daily Speculations. This week, Victor Niederhoffer makes an interesting observation on homebuilding and the wider market.

In another piece titled ‘Consumer Punks’, Vic reminds us to be aware of the chronic pessimists:

“It seems somewhat petty on my part to constantly point out the fallacies in the chronic pessimists’ (the Abelprecbuffgrosoros’) arguments. Eventually they will be right, and I have no idea if the current market is more bullish or more bearish than at any time, and I certainly don’t find this a more than usually good time to establish positions … but the point I wish to make is that there is no reason to think that the reasons for bearishness are greater today than at any other time in the last 100 years.”

“One thing that I can say for sure is that all the chronic pessimists I know of that actually trade, (in contrast to the weekly financial columnist) and who must take responsibility for their calls, are scratching the backs of solvent members from their perches and living quarters in the vicinity of the Trinity Church graveyard. Such will continue in my opinion into the indefinite future, because of the creative power of the individual when placed in a system with proper incentives and the protection of property rights.” (This refers to the long-term upward drift of the equity market).

“The question is, however, that whenever the ratio goes the other way, like P/E, now the lowest in 20 years, or oil, down 5% over the past year, or now the dollar up against the yen over the past year: why then do you never hear about the relation that was formerly bearish and is now being bullish?”

I’ve only been a watcher of the markets over the past fifteen years or so, but I agree completely with Vic’s view. During my time, regardless of the widers state of affairs, the pessimists have never struggled to concoct stories of doom.

PS – Vic’s articles from (2000-2001) have been archived in pdf form and can be viewed here.

2 responses to “Recommended reading at Daily Speculations

  1. One could also make the case for the fallacies of the chronic optimists. Mr. Niederhoffer clearly belongs in that category, witness his fatal experience in 1997 with the LTCM blowup during which he sold thousands upon thousands of naked puts (talk about optimism) and his near fatal experience just before September 11, 2001 when he again sold a whack of naked puts. I think Condi got her quote (roughly) ‘who could have anticipated someone flying airplanes into the WTC’ from Vic, who said “I was exposed. It was nip and tuck.” Niederhoffer shook his head, because there was no way to have anticipated September 11th. “That was a totally unexpected event.”

    People who live in glass houses shouldn’t throw stones.
    Judge not lest ye be judged.
    Let he who is without sin cast the first stone.

  2. Hi IPDaily, I agree there is a case against the chronic optimists and also that VN’s experience may warn against an untempered view. However, VN’s writings do not advocate a reckless approach, more a recognition that the bears have the odds stacked against them, and that generations are losing out as the fearmongers in the media keep them out of the market. My view is that erring on the optimistic side make for profitable experiences in life and the marketplace.

    See my latest article for more on the drift:

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