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Posts Tagged ‘Victor Niederhoffer’

Victor Niederhoffer Thinks He Caused The Stock Market Crash Of 1997

Victor Niederhoffer Thinks He Caused The Stock Market Crash Of 1997

Victor NiederhofferCourtesy of Courtney Comstock at Clusterstock 

Victor Niederhoffer thinks he caused the stock market crash of October 27, 1997, when the DOW dropped over 550 points.

In an interview with Slate Magazine, Nierhoffer explains his theory:

They all knew that if I was hurting in one market, I’d have to liquidate in the other markets.

Whenever someone’s in trouble, it circulates around Wall Street; you’d be amazed how just one small fish is enough to stop the wheels of commerce for long enough to relieve that person of his funds. And then the market goes back to doing exactly what it was going to do beforehand.

I still think that the crash of Oct. 27, 1997, was basically due to brokers running my position against me, knowing that I was on the ropes. The market had its greatest drop in the previous 10 years that day. And then the next day, once they were able to force me out, it went up more than it dropped.

Let’s compare his hypothesis with what some other financial experts think caused the crash.

Bernanke

Bernanke says that October is just a crazy month for the markets.

“Classically, October has always been the month for financial problems,” Mr. Bernanke told the WSJ in 2007

Krugman

The Asian markets were overvalued and the bubble burst - (Urbi Garay’s paper on the crisis)

Malcolm Gladwell

He sold a very large number of options on the S. & P. index, taking millions of dollars from other traders in exchange for promising to buy a basket of stocks from them at current prices, if the market ever fell.

It was an unhedged bet, or what was called on Wall Street a "naked put," meaning that he bet everyone on one outcome: he bet in favor of the large probability of making a small amount of money, and against the small probability of losing a large amount of money-and he lost. On October 27, 1997, the market plummeted eight per cent, and all of the many, many people who had bought those options from Niederhoffer came calling all at once, demanding that he buy back their stocks at pre-crash prices.

He ran through a hundred and thirty million dollars — his cash reserves, his savings, his other stocks — and when his…
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The Art of Being Wrong

The Art of Being Wrong

Courtesy of Bill Luby at Vix & More

Wrong Way

Kathryn Schulz, a self-described ‘wrongologist,’ is the author of Being Wrong: Adventures in the Margin of Error.

I can’t say that I have read her book, but I think her interview with Victor Niederhoffer at Slate, Hoodoos, Hedge Funds, and Alibis: Victor Niederhoffer on Being Wrong should be required reading for all investors. One of the most difficult things to do in life is to learn from the mistakes of other people – and while Niederhoffer is famous mostly for his two large blowups, he is also reflective, insightful and a fun read. Perhaps more importantly, outside of those two blowups, Niederhoffer has a superb track record and is highly regarded for his trading skills. Many think that Niederhoffer’s blowups should negate the value of what Niederhoffer says. I think quite the opposite. Here is a trader we can all learn from, including both his successes and his failures.

For instance: 

“Unfortunately I was so successful for so many years in that particular field that I began to believe in my own success. I thought that because my method worked in markets that I knew about and had quantified, I could apply the same methods to something I didn’t know about.” 

And later:

“I didn’t have the capital to be strong enough to provide a backup in the case of unforeseen events. I didn’t have a proper foundation. I was playing with adversaries who were stronger than me and who actually made the rules. My base of operations was not diversified enough, and I was vulnerable to forces I couldn’t withstand. I was too vainglorious. In my opinion, those are recurring errors behind most disasters.”

But don’t stop at these excerpts. Click through to read the full interview at Slate.

If you are interested in Schulz’s thinking in a broad range of subjects outside of the investment world, Slate has captured a great deal of her content in her column The Wrong Stuff.

Many others have written about Niederhoffer. One of the better pieces I have encountered is John Cassidy’s lengthy feature in The New Yorker from October 2007 (coincidentally, right…
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Lady Gaga: 10 Things We Can Learn [about Apple Inc. and effective branding], from Victor Niederhoffer

Courtesy of Chopshop

As investors of all stripes continue to go gaga for the Cult of Cupertino (snap, crackle, AAPL), what can we actually learn from Apple, Inc.?

Lady Gaga: 10 Things We Can Learn [from Apple Inc. about effective Saatchi-esque Lovemark branding], from Victor Niederhoffer

Click here for the original "Lady Gaga: 10 Things We Can Learn, from Victor Niederhoffer" … reproduced below in its entirety.

The great ascent of Lady Gaga from an also-ran performer in the Lower East Side techno-rock clubs a few years ago to number one selling recording artist in five countries, four million albums sold, and 20 million singles, rivals nothing so much as the ascent of Kilimanjaro in 5½ hours or Apple’s 4000% rise from 5 to 210 and the fourth largest market cap company in four years. Here are some of the things we can learn from her about how to be successful in the markets.

1. The Lady has a core of admirers she can always count on: the gay community. "I’ve got so many gay fans and they’re loyal to me. They’ll always stand by me and I"ll always stand by them." Apple’s loyal fans are those that started out with them making music on their first computers and the minority group that liked the Apple operating system over and above the mainstream Microsoft one.

2. The product must be packaged and designed with great care and verve. Gaga has a special team, the Haus of Gaga, that designs all her clothes and stage performances. "When I’m writing music I’m thinking about what I’m going to wear on stage." Apple’s packaging, its vivid colors, its compactness, directness, ease of use is crucial to its success.

3. You have to be technical to be a success. Gaga was playing by ear at the age of four, planning to go to Julliard at 13. She writes her own music and her voice was good enough to attract Akon to sign her. The companies that have had the highest returns are people by engineers and computer scientists with technical degrees.

4. You need a vision to be successful. Gaga didn’t try to be the world’s #1 singer or its most profitable. But she had a vision to combine glam rock with simple melodies. The best performing companies, Apple or Cisco or Whole Foods, have a product that makes…
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Zero Hedge

China Cuts Interest Rates, Takes Number Of Central Banks Easing In 2015 To 21

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

And then there were 21.

Hours ago on Saturday, the country whose currency is largely pegged to the dollar which itself is now anticipating a rate hike in the coming months, surprised the world by confirming its economic slowdown yet again following a recent rate cut just this past November when it lowered its benchmark rate by 40 bps, after it again cut benchmark lending and deposit rates by 25 bps starting on March 1. Specifically, the PBOC will lower the one-year lending rate to 5.35% from 5.6% and its one-year deposit rate to 2.5% from 2.75%. It also said it would raise the maximum interest rate on bank deposits to 130% of the benchmark rate from 120%.

From the ...



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Chart School

Moving Averages: Month-End Update

Courtesy of Doug Short.

Valid until the market close on March 31, 2015

The S&P 500 closed February with a monthly gain of 5.49%, the largest one-month gain in 40 months. All three S&P 500 MAs and four of the five the Ivy Portfolio ETF MAs are signaling "Invested". In the table below, monthly closes that are within 2% of a signal are highlighted in yellow.

The Ivy Portfolio

The table below shows the current 10-month simple moving average (SMA) signal for each of the five ETFs featured in The Ivy Portfolio. I've also included a table of 12-month SMAs for the same ETFs for this popular alternative strategy.

For a facinating analysis of the Ivy Portfolio strategy, see this article by Adam Butler, Mike Philbrick a...



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Phil's Favorites

Panic in Ukraine Over Food, Empty Stores and Protests; Strategic Food Reserve Empty

Courtesy of Mish.

Here's a brief update from "Ellen" who lives in Lviv, a city in Western Ukraine.
Hello Mish

We have quite a panic over the collapse of currency. People buy any food product that can be stored. Everyone wants to rid of Hryvnia. We haven't seen anything like this since 1991 when the Soviet Union collapsed. Stores are empty.

It is hard to say what exchange rate this days, somewhere between 34 and 42

There were riots in downtown today. A group of protesters was beaten up by police. They marched through downtown and gave a last warning to government officials. Next time they said they will shoot some officials.

Ukraine is on a brink, but the West is not in a hurry to give us money. Perhaps they want something.  Maybe they know the money will end up with corrupt officials who will steal it.

Eith...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Market Shadows

Kimble Charts: Coal

Kimble Charts: Coal

By Ilene 

Chris Kimble's chart for KOL shows a recently beaten down ETF struggling to pull itself up from the ashes. As the chart shows, KOL has recently drifted down to levels not seen since the financial crisis of 2008-9.

Bouncing or recovering with energy in general, coal prices appear to have stabilized in the short-term. Reflecting coal prices, KOL has traded between $13.45 and $19.75 during the past year. Bouncing from lows, KOL traded around 2% higher yesterday from $14.26 to $14.48 on high volume. It traded another 3.6% higher in after hours to $15, possibly related to ...



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OpTrader

Swing trading portfolio - week of February 23rd, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Sabrient

Sector Detector: Sector rankings stay neutral with few bullish catalysts on horizon

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Stocks are hitting new highs across the board, even though earnings reports have been somewhat disappointing. Actually, to be more precise, Q4 results have been pretty good, but it is forward guidance that has been cautious and/or cloudy as sales into overseas markets are expected to suffer due to strength in the US dollar. Healthcare and Telecom have put in the best results overall, while of course Energy has been the weakling. Still, overall year-over-year earnings growth for the S&P 500 during 2015 is expected to be about +8%.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 cha...



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Digital Currencies

MyCoin Exchange Disappears with Up To $387 Million, Reports Claim

Follow up from yesterday's Just the latest Bitcoin scam.

Hong Kong's MyCoin Disappears With Up To $387 Million, Reports Claim By  

Reports are emerging from Hong Kong that local bitcoin exchange MyCoin has shut its doors, taking with it possibly as much as HK$3bn ($386.9m) in investor funds.

If true, the supposed losses are a staggering amount, although this estimate is based on the company's own earlier claims that it served 3,000 clients who had invested HK$1m ($129,000) each.

...



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Pharmboy

2015 - Biotech Fever

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

PSW Members - well, what a year for biotechs!   The Biotech Index (IBB) is up a whopping 40%, beating the S&P hands down!  The healthcare sector has had a number of high flying IPOs, and beat the Tech Sector in total nubmer of IPOs in the past 12 months.  What could go wrong?

Phil has given his Secret Santa Inflation Hedges for 2015, and since I have been trying to keep my head above water between work, PSW, and baseball with my boys...it is time that something is put together for PSW on biotechs in 2015.

Cancer and fibrosis remain two of the hottest areas for VC backed biotechs to invest their monies.  A number of companies have gone IPO which have drugs/technologies that fight cancer, includin...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly.

Click here and sign in with your user name and password. 

 

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Option Review

SPX Call Spread Eyes Fresh Record Highs By Year End

Stocks got off to a rocky start on the first trading day in December, with the S&P 500 Index slipping just below 2050 on Monday. Based on one large bullish SPX options trade executed on Wednesday, however, such price action is not likely to break the trend of strong gains observed in the benchmark index since mid-October. It looks like one options market participant purchased 25,000 of the 31Dec’14 2105/2115 call spreads at a net premium of $2.70 each. The trade cost $6.75mm to put on, and represents the maximum potential loss on the position should the 2105 calls expire worthless at the end of December. The call spread could reap profits of as much as $7.30 per spread, or $18.25mm, in the event that the SPX ends the year above 2115. The index would need to rally 2.0% over the current level...



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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!




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